Protecting your business when an employee leaves
As the economy continues to improve and employers feel more confident about recruiting new staff, many employees will be thinking about moving jobs. A recent survey by the Institute of Leadership and Management found that one fifth of employees plan to leave their jobs this year, over one third are unsure about whether they will stay or not and one in ten want to start their own business.
Taz Singh, Solicitor and Employment Law specialist at Malcolm C Foy & Co Solicitors in Doncaster and Rotherham outlines some of the steps you can take to protect your business as staff turnover increases.
Falling out with a senior employee – the worst case scenario
Imagine arriving at work one morning to find that your star employee has resigned without notice. They have been recruited by your main competitor and their entire team then resigns to join them. They have taken confidential information, including customer and pricing details, and proceeds to contact all of your customers with a view to offering them similar products at lower prices.
This scenario may sound extreme but it can and does happen. The facts may be slightly different: a key employee could spend months quietly setting up his own business in direct competition with you, before they resign and try to steal your customers or they could give notice and join a competitor, only for you to find out months later from a chance conversation with a customer that they are trying to poach them. Any of these situations could represent a major threat to your business. The employer is usually the last person to know what is happening, so it is important to be prepared.
There are a number of steps you should take if you become aware that an ex-employee is a potential threat to your business.
The first step is to assemble a team of people to manage the situation, investigate and gather evidence. Speak to other employees, customers and suppliers. Be aware that whatever you say is likely to be reported back to the ex-employee. You should also examine your IT systems closely, such as the ex-employee’s PC and laptop, including their use of internet and email, and their mobile phone. Your solicitor will find an expert to help with this.
The second step is to review your contracts of employment. One of your priorities will be to check the ex-employee’s contract to see whether it contains any restrictive covenants, which will limit what they can do after they leave. In the longer term, you should also check that you have adequate protection in other employees’ contracts.
The third step is to minimise the impact on other employees, customers and suppliers. You will need to take steps to replace the employee or reallocate their duties among existing staff. You should speak to colleagues who may be at risk of being poached and do everything you can to shore up your relationships with customers and suppliers.
The last step is to assess whether the former employee poses a threat and take legal advice on how to prevent damage. Your solicitor will advise you if you can take out an injunction to stop the employee or make a claim for compensation. In some cases you may be able to take action against the new employer as well.
Restrictive covenants in contracts of employment
You should ensure that those employees who present the most risk, usually senior staff and sales teams, have restrictions on what they can do when they leave in their contracts of employment. These clauses must be tailored to your business and to the individual employee, and you should not take a ‘one size fits all’ approach. Contracts should be reviewed regularly and may need to be amended if the employee is promoted or changes roles.
Contracts of employment should contain the following forms of protection for your business:
an adequate notice period if the employee wants to leave;
a garden leave clause, enabling you to require the employee not to come into work during their notice period so that you can keep them away from customers;
a confidentiality clause to protect your trade secrets and confidential information;
a clause protecting your inventions, copyright and intellectual property rights, if appropriate;
a clause requiring the return of all property and documents, including copies, on termination; and
restrictive covenants, which will prevent an employee from competing with your business, soliciting your customers and potential customers, dealing with your customers, poaching your employees and interfering with your suppliers for a limited period of time after employment ends.There is no guarantee that restrictive covenants will be enforceable and you may need to apply to court for an order to enforce them. However, they may act as a deterrent.
Prevention is usually better than cure so it is valuable to reflect on ways of engaging and motivating your staff, which will mean that they are less likely to want to leave in the first place. This can include improving communication, ensuring they feel valued and providing opportunities for learning new skills and progressing within your organisation.
If you have any queries on contracts of employment or restrictive covenants, or an employee has left and you suspect they may be a threat to your business, please contact Taz Singh, Solicitor and Employment Law specialist at Malcolm C Foy & Co Solicitors in Doncaster and Rotherham.
T: 01302 340005
F: 01302 322283
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.26.03.15