What are restrictive covenants and why do I need them?
Q: I own a start-up which grew very quickly and a few years ago I hired in a couple of senior personnel to help run the business. After 5 years, one of these senior hires is now leaving the business and going to a company which isn’t a direct competitor but operates in a very similar field. This person is integral to the business and very close to our clients. I don’t want to consider putting them on garden leave, but I am concerned they may take vital information to their new workplace. What can I do to protect the business?
A: You’re not alone and following the year of change we’ve seen, and with it employees leaving jobs and moving on, protecting your business is no doubt going to be of paramount importance.
There are several areas that you might consider as integral and invaluable to your own business success and if you feel that this employee would need to continue in their role to keep your business functioning, it is quite a predicament when they then hand in their notice
You should check if your contract of employment with this individual contains appropriate provisions protecting your sensitive commercial information both during their employment and following their departure. If applicable to their duties, a clause should have been included protecting your intellectual property rights. In addition, it seems there may be a concern about them soliciting your clients/customers when they go to work for their new employer. Another concern might be the possibility of them enticing other staff to leave the business. Hopefully, the contract of employment contains restrictive covenants which will give you the option to take action preventing such activity.
Whilst you say you don’t want to put them on garden leave you may want to reconsider that. Provided that there is a garden leave clause in the contract of employment, a period of garden leave might be a wise precaution depending on how significant the risks referred to above are.
Downs Solicitors are covering this very topic at the next Employment Bitesize webinar series on Wednesday 26th May at 9.30am. As well as covering the sort of information you can protect, we are also talking about restrictive covenants and how to enforce them if former employees are in breach as well as garden leave.
Find out more about our forthcoming webinar and book you place.