A business establishing themselves in the early years of growth typically invests time, effort and money into creating an innovative product or service.
Building a workforce is often fundamental to this, but the part that is sometimes overlooked is ensuring that the right protection is in place to stop employees from taking those ideas and setting up in competition.
If this is your business, the starting point is to make sure that employment contracts for key staff contain restrictive covenants, including:
- confidentiality clauses (protecting information such as customer details or code)
- non-compete clauses (preventing an employee competing for a certain period of time and area)
- non-solicitation clauses (preventing them asking customers to leave with them)
- non-poaching clauses (preventing the enticement of colleagues to join them)
All contracts have to be carefully tailored to role, seniority and influence over clients and colleagues. They may also need revisiting as an employee climbs the ladder as more senior roles may require stronger restrictions.
Contractual restrictions preventing someone from earning a living after they have left employment can be difficult to enforce. In order to make them enforceable, you need to make sure they don’t go further than is reasonably necessary to protect your legitimate business interests and are proportionate.
Even if they are never tested, having restrictions in a contract may at least dissuade a budding competitor. This is often more valuable than having to enforce them as court enforcement can be costly and risky.
Reserving the right to impose garden leave, where your employee can serve their notice without being able to work elsewhere or continue to influence your clients and staff, can be a very useful tool. Timing can be everything for a competitor and taking the wind out of their sails by making an employee sit on the side-lines for several months can be all the protection you need.
If they are making moves, an application for an injunction to stop them may be appropriate, provided you have contractual restrictions to back this up. Otherwise, suing them for breaching their contract is an alternative.
Ensure your clients, suppliers and staff know their value and are made to feel confident enough to remain on your side.
Although, when necessary remind the employees of their obligations and potentially reinforce the outgoing employee’s obligations through a settlement agreement.
The key is to obtain legal advice from the outset to utilise the protection available, before it is too late!