Unfortunately, the short answer appears to be yes. Reuters reports that Bank of America is telling employees in the US that they can’t accept a job offer from a competitor for three months unless they relinquish either their deferred compensation or their right to sue the bank.
London employment lawyers say they haven’t come across termination contracts containing similar clauses here, but that most UK banking employment contracts include restrictive covenants which apply even after redundancy.
“Restrictive covenants are common in banks’ employment contracts,” says Philip Landau, partner at employment lawyers Landau Zeffertt Weir Solicitors. “For some highly specialised roles, it’s not unusual to find covenants saying that individuals are unable to work for specified competitors within three to six months of leaving.
“Redundancy makes no difference to this at all,” he adds.
If you want to be free to work for a competitor immediately after being dumped, Landau advises obtaining a waiver of restrictive covenants before you sign a compromise agreement. Some, but not all banks are apparently willing to do this.
However, another employment lawyer, Charles Ferguson of Ferguson Solicitors, says any attempt by banks to enforce restrictive covenants on redundant staff would be both outrageous and doomed to fail.
“They’d have to show that they’d suffer a loss from the person going to work for a competitor and if they’d made that redundant it would be hard to establish that,” Ferguson tells us.