It may be that finding a new job is at the top of your New Year’s Resolution list, or you may find yourself head-hunted for a new and more exulted position. The more senior you become however, the more carefully you need to think about the contractual implications of jumping ship.

Post Termination Restrictions. Does your current contract of employment try and limit your commercial activities after you leave? Post termination restrictions are only enforceable if they are reasonable in terms and scope and protect legitimate business interests. A clause stopping you poaching staff or suppliers for six months may be reasonable. A clause stopping you working in clothes retail for the next two years is unlikely to be.

If your current employment contract does impose reasonable restrictions on what you do after you leave, will this make you less attractive to your new employer? You may be able to get your current employer to relax those restrictions. The more open and above-board you are with your current employer, the less likely the company is to threaten legal action in a fit of paranoia. If you think the restrictions are unreasonable, it may be worth getting your solicitor to point out that fact to your current employer and sorting out something which is mutually acceptable.

If your new employer wants you to breach those restrictions, at the very least you should get them to indemnify you against any claim & legal costs that your current employer may bring as a result. However no one with any sense would want to become embroiled in perilous and costly legal proceedings just after starting a new job. Remember too; if you get a reputation in the industry for being unreliable, this may come back to haunt you.

Notice Period. A long notice period provides a sense of security but the flip side is that your hands may be tied for some while if you want to resign. Notice periods in excess of six months are not uncommon for senior executives.

How long is your new employer willing to wait? If the new company is serious about you, and your notice period is industry standard for your level, it will probably be prepared to wait. If your new employer is particularly keen for you to start as soon as possible, you may be able negotiate a shorter period with your current employer. This is likely to depend on whether your new employer is a competitor and on the goodwill you have been able to preserve.

Your current employer may want to put you on ‘garden leave’, which means that you are not obliged to attend work, but you remain bound by all the other terms of your employment, such as the duty of confidentiality and the duty not to work elsewhere. Superficially attractive though it may be, ‘gardening leave’ is not good if you need to practice your working skills consistently to remain marketable. Employers can only oblige you to take gardening leave if they reserve the contractual right to do so.

If you are thinking about breaching the contractual notice period, think again. Your current employer may be able to sue you if it suffers losses as a result of your breach. If you are going to a competitor, the company may be able to get an injunction to stop you.

Shares and Share Options. If you have unexercised share options, you may well lose the right to exercise them if you resign. You should look at your share option scheme carefully. Depending on what the share options are worth to you, you may prefer to hang on till they vest. Even if your shares are fully vested, if your employer is unlisted, you may still be obliged to sell them back to the company at a certain price. Dust off any share-holder agreements at the back of your drawers and have a good look.

Discretionary Bonuses: If you resign, it is a fair bet that your current employer will be unwilling to cough up that fat discretionary bonus you were expecting at the financial year end. Case law now indicates that employers must exercise discretionary bonus clauses genuinely, rationally and in good faith. However if the prospective bonus is likely to be sizeable, you may consider keeping quiet about your imminent departure until it is safely in your bank account.

Your New Contract of Employment: All of the issues arising above apply when considering your new employment contract. If you are able to exercise the leverage, you should certainly consider negotiating around share options, guaranteed first year bonuses, notice periods and other terms. The timely intervention of a lawyer on your behalf at this stage may reap dividends in the future.

This article is based on UK law, is for general guidance only and should not be relied upon without specific legal advice.

Caroline Walker 020 7544 5625 carolinew@sghlaw.com