Business protection from current and former employees

In an article for London Business Matters, the official publication of London’s Chamber of Commerce, Jonathan Mansfield discusses steps employers can take to protect their business from ex-employees.

An important challenge for employers is how to protect the business from former employees. While working for the firm, employees may acquire knowledge of confidential information of a strategic or technical nature. They may also develop close relationships with clients and key colleagues.

Can these valuable assets be protected at all? The starting point for a UK court is that restrictions after the end of employment are an unlawful restraint of trade, but with careful planning steps can be taken to safeguard a business’ interests.

Legitimate interest

In fact it is possible to protect the business from ex-employees, provided it is a legitimate interest which is protected (for example, client connection, confidential information and a stable trained workforce). It also has to be reasonable in time and content.

Protection during employment

Something we always remind employers is that protection starts during the employment. You can make sure you have a well-drawn up confidentiality clause. The contract clause defining duties of employees should also be carefully considered. Also, yous should have in place a “garden leave” clause; this will mean that the employee can be kept away from clients and access to sensitive data during their notice period.

Protection after employment

Post employment restrictions are also permissible. These are often referred to as “restrictive covenants”. Typically, these include non-compete clauses, restrictions on dealing with or soliciting clients or other vital contacts and no-poaching of key employees. A non-compete clause is a blunt instrument which may be considered to be unreasonable in some cases. The business should ask itself what is the minimum necessary to protect the business. Non-dealing and non-solicitation covenants are more likely to be enforceable but should be framed in a limited and specific way. For example, if the clause covers all clients rather than just those the employee had contact with it may be too broad.

Clauses of 6-12 months may be enforceable if reasonably necessary but longer that this and there is much less chance that a court would uphold the restriction.

Prevention not cure

Litigation in this area is expensive. Get it wrong and a company will be throwing good money away. Get it right and vital interests will be safe. We strongly recommend a review of your business’ protection in this area.

To speak to us about your employment issues, whether to do with strategic business decisions or a particular issue involving an employee, get in touch with Jonathan Mansfield or another member of our Employment team on 03702 188 990.