competition from ex-employees

Many employers take the view that there is little or nothing they can realistically do to protect their businesses from a departing employee who may compete with them once they have actually left. There is a view that restrictive covenants are very difficult if not impossible to enforce, and that any other protection is too complicated and costly to rely on and police.

This should not be the case. If an employer has properly drafted protection in the contract of employment, it should be in a position to wield great power should the situation arise where an employee seeks to leave and immediately compete.

The employer’s defences

Restrictions preventing employees from soliciting, and even dealing with, the employer’s customers, can be enforced provided that the restrictions are properly drafted and relevant for the individual employee.

This is where many restrictive covenants fall down; they are usually drafted in the same form for all employees, meaning that in individual cases, restrictions may not be enforceable since they might be wider than is reasonably necessary to protect the legitimate business interests of the employer.

If an employer can show that it has important trade secrets or confidential information to protect, or in certain cases that it has particular goodwill or diffuse customer connections, it might also be possible to have an enforceable non-competition restriction, provided that it is tightly worded and for no longer than necessary.

One protection employers often overlook is a contractual ability to put staff on “garden leave”, allowing an employer to insist that an employee who has given notice cannot immediately go and work for a competitor elsewhere, but must stay at home without talking to colleagues or clients, for all or a part of the period of the notice period. Pay and benefits need to continue, however.

Employers also often overlook the advantage of having specific clauses in the contract dealing with confidentiality, the return of property, documents, software – and copies – and intellectual property rights. All can assist in protecting an employer from a departing employee who seeks to compete afterwards.

Tactics

Having an arsenal of potential rights over an ex-employee is one thing; making it work, in a practical sense, is another. It is not suggested that, in every case, an employer would be wishing to institute legal proceedings; usually threatening such proceedings from the advantage of a powerful legal position is enough to force the departing employee to do what is required.

It should be noted that the new employer of the departing employee can also be targeted. Provided that the new employer knows of the contractual restrictions, it can be joined into proceedings or sued separately for inducement to breach contract. Such a threat can sometimes lead to the new employer going off the idea of being involved with one’s departing employee at all.