Protecting your business from potential damage when senior executive leave At a glance
- If a senior executive with access to your key business information moves to another employer, then you could be in a vulnerable position.
- Contracts for these key employees should provide you with protection, for example using confidentiality clauses and restrictive covenants.
- It is vital these contracts are properly drafted and enforceable, so you will need expert legal advice.
- Our specialist employment solicitors will discuss your situation, identify your needs and ensure your contracts are fit for purpose. If necessary, we can also take action to limit the potential damage if a senior executive or an entire team has already moved to a competitor.
As an employer, you have invested time and money in your business and naturally, you will want to protect it. When a senior employee in a position of trust and with access to key information decides to leave and go to another company or set up their own business, you could find yourself in a vulnerable situation.
There are various ways to mitigate against the effect of this happening. Ideally, you should have protective clauses written into executives’ contracts. To make sure they are properly drafted and enforceable, you’ll need expert legal advice.
Confidentiality is mandatory priority for every business. Consequently, employers frequently include restrictions in employment contracts to protect sensitive knowledge and information that individuals have access to during their employment. These restrictions need to be carefully drafted and specifically tailored to your business, to ensure they are enforceable.
Our experts can help you draft a confidentiality clause for an employment contract or a confidentiality policy which can be used for non-employees, ensuring all your business interests are considered.
Restrictive covenants and injunctions
A restrictive covenant can be included in employment contracts to provide protection over sensitive knowledge and information gained during employment. These restrictions mean the employee agrees not to do certain things for a certain period of time, once their employment is terminated.
However, restrictive covenants can be deemed unenforceable if they are not relevant to the employee’s position in the business, and they cannot be used as a restraint of trade. You need to be able to prove the restrictive covenant is:-
- necessary to protect their legitimate business interests; and
- for a period no longer than is necessary to protect those interests.
We can help you draft restrictive covenants which will be legally compliant and enforceable. If you find an executive is challenging their restrictive covenants, we can analyse the covenants and, where possible, convince the court that the restrictions complied with the law and were sufficiently narrow in scope that they should be enforced.
Alternatively, if you believe an ex-employee has breached a restrictive covenant, we can help you obtain an injunction. In these circumstances, speed is often essential for damage limitation, and we will move quickly to maximise protection for your business.
Sometimes an entire team can move from one business to another. If this happens to you, it can have serious implications, especially if they have moved to one of your competitors. As well as the cost and time involving in recruiting or promoting to replace the ex-employees, there is the very real risk that sensitive and valuable business information may be divulged to your rivals.
Trying to remedy the situation once the team move has taken place will almost certainly be complicated and expensive. It’s best to be pre-emptive and ensure key employees have contracts that reflect their value to your company and help to minimise the consequences if they are involved in a team move.
You may already have included restrictive covenants in their contracts, so if you haven’t already done so, now is the time to check they are legally enforceable. There are some other options available to you. You could include a ‘gardening leave’ clause. This means that when they resign, you can exclude them from your business during their notice period, to prevent them having further access to sensitive information. The clause should also stop them working for a competitor during that period.
Additionally, if an employee holds a senior position, such as a director, then they will have fiduciary duties to your business, and by taking part in a team move there is the possibility they may have breached those duties. This could lead to action in the High Court.
If you are having to act once a team move has happened, you will need to consider other legal action. For example, you could take out a ‘springboard’ injunction against your former employees. This is intended to prevent them using your confidential information to gain a springboard or head start in their new business. This will probably be contested, so you will need to be sure the injunction meets the necessary legal criteria.
As you can see, this is a complex area of employment law and because any advice will be specific to your business and employees, we recommend you talk to us as soon as you have any concerns.
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