PROTECTING YOUR BUSINESS FROM DEPARTING EMPLOYEES

Richard Gvero, Joint Senior Partner and Head of Employment, offers answers to questions that business owners may have.

Senior employees have access to commercially sensitive information such as business strategy, product details and customer pricing/ requirements. They also have access to client contact details and build relationships with key customers. Therefore, when they leave your business, they have the potential to cause serious harm if they join a competitor or set up in competition.

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Q How do we guard against that information and those relationships passing to a competitor?

A

The key is not to wait for the risk to arise and to include carefully drafted restrictions in employment contracts. These can control the misuse of information and the exploitation of customer relationships beyond an employee’s time in your employment. They can prevent the former employee competing with your business for a period of time.

Q Are such restrictions enforceable?

A

Yes if the restrictions have been carefully drafted. They will be enforceable provided that they do not extend beyond what is reasonable to protect the employer’s legitimate commercial interests in their “trade secrets” or valuable business relationships. Simply wanting to prevent competition is not sufficient justification.

Q When do restrictions overstep the mark?

A

That is often when they are too wide in geographical range or over too long a period of time. For example, the restriction might prevent an outgoing employee from competing in the same industry within a geographical territory which goes beyond where the employer operates. Another example of excessive restriction is where the restriction prevents the employee from dealing with customers with whom they have not previously had material dealings. In that case, there would be no relationship with the employee to protect.

Q Can the poaching of staff be prevented?

A

Yes it can, provided the restriction is proportionate. The restrictions are generally considered inappropriate for

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QIf these restrictions are breached, what remedies are available to you?

AAs well as being able to sue for any losses that your business has sustained, you are able to apply for what is known as an “injunction” to stop any further breach of the restrictions and the competitive activity.

QAre there any pitfalls to look out for?

AIt is important to act swiftly both to minimise the loss that your business sustains and also to be able to obtain an injunction since courts are reluctant to grant relief where there has been significant delay. The restrictions must be tailored to your business and the seniority of the employee in question. “Cut and paste” restrictions are not advisable. Also, keep the restrictions under review as their reasonableness is assessed at the time they were entered into and not at the time they are enforced.