Written on 30/06/2022

 IFAs who move firm to firm are the scourge of that industry.  They take customers with them prevent owners from building long term value in IFA practices. 

On the other hand, individual IFAs like being able to set up in business relatively easily and take clients with them

In Law by Design Ltd. v Saira Ali the High Court upheld a 12-month long non-compete clause against a solicitor attempting to move clients from their old employer to their new employer.  Ms Ali worked for Law by Design (‘LBD’) as a solicitor specialising in employment law, providing legal services mainly to NHS clients. 

She resigned from LBD in May 2021, after she was offered a position as partner at Weightmans LLP (‘Weightmans’). Shortly before resigning, Ms Ali signed a service agreement (‘SA’) and a Shareholders’ agreement (‘SHA’), both including a non-compete clause, restricting her ability to join another firm for a period of 12 months following the end of her employment.  

Ms Ali’s lawyers claimed that the non-compete clauses were drawn too widely, lasted for too long, and were therefore unenforceable.  However, she lost her case because as part of her job application she provided a ‘pitch’ to Weightmans stating that she intended to ‘transition’ a significant number of LBD’s clients to Weightmans.  For LBD, a boutique  employment law firm, this would mean losing over a third of its turnover and LBD therefore sought an injunction against Ms Ali, to prevent her from working for Weightmans. 

The court pointed out that the non-compete clause allowed Ms Ali ‘to join a business anywhere in England and Wales that does not compete with LBD for NHS clients’ located in a specified area, and was therefore enforceable against Ms Ali, and the injunction was granted. 

IFAC's advice on this case is that your should review your restrictive covenants carefully - and on a case by case basis.  It is a tricky area and should be approached on a case by case basis, rather than with a blanket clause.

Ensure that your restrictive covenants are tailored to each employee and drafted for what is appropriate to your business and the role of the IFA.  Ensure the clauses have time limits, geographical limits and scope limits, and that will help to make them more enforceable than the catch all threats that are often seen in employee contracts.

Charlie Palmer


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