Checking my contract - Restrictive Covenant

Hi,

Firstly, apologies if this isn’t really the right area of QT3 to discuss this - it’s games industry related rather than just games, I hope you don’t mind. I don’t have many useful contacts I can ask this question directly to so I’m grateful for any feedback or views. Thanks.

I’ve been out of games for a few years. I just got back in and due to start with a company in May. I’m reading through my contract and most of it is pretty standard stuff. There is a restrictive covenant clause which wants to prohibit my employment from any other competing firm for a period of six month after my employment with this developer comes to an end.

I should point out that this is a UK developer rather than a US one.

I’m wondering just what my real options are here. Ideally, if I left this developer it would be because I’m offered a better job with another one. If my employment has ended, can such a clause be enforced? What sort of penalties could there be? Is such a clause typically enforced in anyone’s experience? Does anyone have any direct experience or stories relating to this sort of clause? Is this clause a Very Bad Thing and something I should consider losing sleep over??

I know there’s been some kerfuffle at the start of the year with job cuts at EA and Activision. I recall there being some rumours on the grapevine about issues between EA and Ubisoft and how a similar sounding clause had made life difficult for staff leaving these companies. Any clarity or truth to these stories would be greatly appreciated.

The last few developers I worked with, up to about 3 years ago, didn’t have any such clauses.

This is a good opportunity to get back into an industry I adore. The developer keeps a very low profile but their products are not licenced or farmed out stuff so I am delighted to have the chance to work with them. At this stage, I’m a little reluctant to name names though.

All constructive feedback or general views on this matter would be greatly appreciated. Thank you!

On general principles, I would think long and hard before signing such a contract. Actually, the first thing I would do would be to cross out all lines referring to such a thing on any copy I sign, initial next to the crossing-out, give that to them, and see if they complain. If they do, see how far negotiation gets you. Restricting an employee’s ability to find more work in the case of unforeseen circumstances is an arm-twisting tactic, nothing more nothing less. The reality of game development is that people can find themselves on the street rather unexpectedly, and any smart employee will take that into account, and a worthwhile company will accept that fact.

If you can’t get that clause thrown out, see if you can at least get them to narrow it down to specific kinds of competitors and/or specific roles within the company, or that it becomes void in case of involuntary termination. I.e., so if you want to go work for FooBar Inc. and they’re considered a competitor, you could still do so if you’re in a different role (physics instead of UI) than your current one, or you were laid off.

We had to do the same thing when our company got bought out a few years ago, and quite a stink was raised over it since a first reading made it sound like we were barred from any kind of software development at all. What, am I supposed to go do plumbing for six months instead? The higher-ups wouldn’t drop it, but we did get it clarified down to something like the above.

Definitely negotiate. I’ve never seen an employer that would change their mind about hiring someone just because the person tried to negotiate a better contract–and I wouldn’t want to work for any company that did.

I’ve had good luck getting “we own everything you do, at work or out of it” clauses struck from my contracts. (I suspect those clauses are unenforceable under California law anyway, so I have no idea why they keep putting them in there.)

Basically, Ubi had a similar non-compete with their Canadian contracts. Supposedly it’s enforceable there (it’s not in some places). So EA publically complained that Ubi was trying to stifle competition, right before laying a bunch of people off themselves if I’m not mistaken. Ubi released a public response calling EA hypocrites coughexclusive NFL licensecough and that was the end of it.

I don’t think it’s realistically enforceable in Canada; attempting to enforce such a thing would put your firm in jeopardy of an economic interference-type lawsuit (I forget the exact words). Trying to stop someone from being able to earn a living in a state with an elaborate social net is just asking for trouble.

I hate how companies expect that kind of loyalty from new employees. They should have to earn the loyalty. I told my employer that there was no way I would sign such a clause, particularly when I’m married and what if I decided to move away because my wife had an opportunity elsewhere. He agreed and struck the clause out. The wife-moving argument was just bullshit, I wouldn’t have wanted to sign it, period. But having an example excuse gives them a reason to cross it out without it being a purely antagonistic argument, if you think that might help in your situation.

You know, maybe if you whiny bitches just bowed to your corporate masters like you’re supposed to, there wouldn’t be any problems.

Troublemakers.

I think such clauses are perfectly fine, so long as they include the stipulation that your former employer must pay you your prior rate for that six months on the beach.

You said this is a UK developer - if you’re regarded as a “professional” employee, ie no overtime payments, salaried etc, then those restrictive clauses are generally regarded as unenforcable under EU law. Companies can’t restrict your rights to work within the EU. Check with a lawyer…

At least under Canadian law, it is very difficult to enforce restrictive covenants in the employment context, as opposed to in the context of an agreement for the sale of a business (in which the vendor is prohibited from competing with the purchaser for a period of time). In the employment context, the presumption is that the restrictive covenant is unenforceable as contrary to public policy, and it is up to the employer to prove otherwise.

Further, if the restrictive covenant is unlimited in its geographic scope, in other words, it prevents you from working for a competitor anywhere in the world, in Canada at least, the odds of it being enforceable are slim to none.

UK law is likely the same on this topic. In any event, you should check whether there is a governing law clause in your employment contract (specifying the law of which jurisdiction applies), and consult a lawyer in that jurisdiction to get some real legal advice.

For what it’s worth, I am unaware of any non-compete clause ever having held up in US court – yeah, not worth much, eh – however let me use this space to inquire if anyone knows of one that has held up.

Of course any IP you create under employment as well as any otherwise owned by the employer is naturally restricted and uncommunicable to future employers regardless of your contract unless specially granted. When I joined Bellcore I recall they gave me $1 cash “and other valuable considerations” for my brain, but my other employers felt this exchange unnecessary, no doubt with good reason.

Yikes! This is totally wrong. They are enforceable in many jurisdictions under certain conditions.

Check with a lawyer familiar with the law in your country/state…

Yeah. There are law firms that specialize in intellectual property law, and contracts like these are their bread and butter.

Since most civil cases will settle before trial, and most courts don’t publish, good examples are few & far bewteen. However, I recall a case where a TV sportscaster was required to serve out the terms of his contract before he could move to a competitor. But then, that son of a gun could afford it.

In any event, the real question to ask is: can I afford to litigate the issue? If you can’t, good flipping luck vindicating your rights.

Always, always always consult with a lawyer on issues like this.

Thank you for all the feedback.

My job role will be as an Assistant Producer (don’t laugh) so it’s not like I’m going to be directly involved in creating new tech code on next-gen hardware that I could take to another developer and allow them to compete with.

I suspect most of the work I’ll be involved in would be covered by a standard NDA.

Taking on board all the feedback I have received on this issue I will be speaking to my future employer to negotiate the terms of this clause. I’m very grateful for your input.

Thanks again!

I was faced with a similar “no compete” clause about 15 years ago, and consulted a lawyer. Although I’m not in the “game” business, the contract did involve employment as a software engineer.

My lawyer said the the clause was completely unenforcable as there was no consideration for the provision i.e. the employer is not paying for the, in my case, 6 months of non-competition. Great!! But, he did say that the employer could get an injunction prohibiting me from working for a competitor while the case is decided. Then with a few continuances, they could tie up the case for the 6 month period… essentially enforcing the original provision. His advice was don’t sign it. I didn’t and didn’t get the job.

Years later, I also found out that in some industries, no-compete clauses are considered “industry standard”. Basically the entire industry has a “gentleman’s agreement” to not hire people who are saddled with no-compete agreements. They use “fear of lawsuit” as their excuse for not hiring people.

My personal advice is to not sign the agreement. If they balk, then simply don’t take the job. To me a no-compete clause is a free pass for an employer to abuse their employees.

I recently turned down a job because of an evil non-compete clause. To paraphrase it stated I was not allowed to work for any developer, publisher, PR firm, retailer or any other business associated with the Videogames industry within the continent of North america for a period of 1 year after leaving the company.

I’ll not name names but the job was in Montreal. This is significant because I’m a Brit. I was being asked to move my entire life to a foreign country without having had an on-site interview, without being told what project I’d be working on and with less holiday time than I have ever encountered in my life (a mere ten days).

The company in question assured me they would never ever enforce this clause. So I asked them to remove it if they’d never enforce it. They refused. So I turned the job down and am now still unemployed (although I’ve since had two other job offers which I’ve turned down for entirely different, and some would say less justifiable, reasons).

It wasn’t the clause so much as the unwillinglness to negotiate on the point. I believe that they would have never enforced it but I don’t want to work for a company that doesn’t understand the contract exists just as much to protect me, the employee, as it exists to protect them.

Plus non-compete clauses are inherently petty anyway. It’s like taking your ball home after the other kids beat you at footy. There’s nothing you can do about what happened so it’s just being spiteful after the fact.

Problem is they get away with this stuff because probably 90% of people who work in the industry (and for that matter the world) don’t actually read what it is they are signing.

That’s the big thing for me as well. If they aren’t willing to negotiate on your contract, you know they’ll never give you an inch on anything, ever. It’s just not worth it, unless you’re absolutely desperate for a job.

And never, ever, ever have anything to do with someone who says they’ll never enforce a clause, but won’t remove it from the contract. They’re blatantly lying to your face. Not the way to start a relationship.

Problem is they get away with this stuff because probably 90% of people who work in the industry (and for that matter the world) don’t actually read what it is they are signing.

Indeed.

I make a point of never signing anything without reading it first. You can learn a lot about a place by how they act while waiting for you to finish reading a document–if they get impatient, don’t trust them an inch.