An employment expert and partner at law firm Pinsent Masons has warned overly restrictive contracts may drive key workers out of the North Sea oil and gas industry and spark a brain drain.
Katie Williams, who works primarily with oil and gas clients and is based in Pinsent’s Aberdeen office, said: “It’s very common, especially in the energy sector, that employees will have a covenant in their employment contract which prevents them from joining a potential competitor for anything up to 12 months after leaving a job.
“Most employees rightly respect those conditions when they leave, but in many cases it could be argued such covenants were included at the outset of the employment as a knee-jerk condition, and when closely examined have little merit.
“The net effect is that highly skilled workers could be forced out of the oil and gas industry and into another sector where it is easier to find a suitable job.
“It is prejudicial to moving talent around and in the case of entrepreneurial individuals it could deter them from starting-up a new business and stifle innovation, which is not something the oil and gas industry can afford at the current time.”
She added: “I’ve had cases where people who have been made redundant who are under a restrictive covenant and been prevented from taking on a similar job for 12 months.
“This is clearly unfair as they find themselves in this position through no fault of their own and have a huge amount to offer a new employer, but they can’t do so because they fear it will be in breach of their employment contract.
“Some employers will confirm in writing that they won’t enforce covenants in these circumstances, but there are others who won’t and this hinders the movement of valued and talented workers.”
The Department of Business, Innovation and Skills has issued a “call for evidence” on such restrictive practices across the UK’s private sector in response to widespread concerns.
Business Secretary Sajid Javid called on businesses and entrepreneurs to give their views on whether clauses that prevent someone from competing against their former employer are stifling opportunities to innovate and grow.
Mr Javid said: “The clauses are only enforceable in a court of law if it protects a legitimate interest and is reasonable.
“However, there have been suggestions that they can hinder start-ups from hiring the best and brightest talent, so the UK Government is asking for views from individuals and employers on whether this type of practice is acting as a barrier to innovation and employment.”