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Protecting Confidential Business Information
Every business has information that is private and integral to the running of the business – the kind of information that you would not want other businesses to know about. Whether it be contacts or business strategies, this information can be invaluable to its success. Protecting this information is important to your Business.
When an employee leaves, businesses want to protect this information: this is where restrictive covenants come in.
Also known as non-compete or confidentiality clauses or in their formal name "post-termination restrictive covenants", employers include these clauses in employment contracts for a number of reasons, including to:
- stop employee's using information gained at their old workplace in their new job
- restrict the employee's ability to start up a business that competes with their ex-employer
- prevent the employee "poaching" your business contacts, clients or employees and provide a time limit on all the restrictions
- limit the area, geographically speaking to which the restrictive covenants apply.
Protect your business interests – update your Employment Contracts
Restricting the use of this information by employees after their employment has ended may be vital to the protection of your business or customer contacts.
Ideally, business owners should require all new employees to enter into an employment contract when they start their new job and it is a legal requirement for an employer to issue an employment contract within two months of an employee starting work. The beginning of the employment is the time to consider carefully the potential "damage" an ex-employee might do should they leave the business – and to include appropriate restrictive terms in the contract.
Without these covenants, the business could be left wide open to "attack" by an ex-employee – with no means of redress.
What do you want a Restrictive Convents the achieve for your business?
Start with clearly defining what you want to protect. What risk would his particular employee pose?
Do you want to restrict this particular employee;
- acting in competition
- from soliciting customers or potential customers
- from setting up in competition
- working with existing or ex-employees
Managers, Executives, Bankers & Brokers
Employees in some roles have access to, particularly sensitive information. Executive, management, sales, banking, broking and senior staff members often have non-compete clauses in their contracts of employment where issues of potential competition increase in sensitivity with seniority.
However, care should be taken with drafting the non-compete clauses: the "one-size fits-all" approach to restrictive covenant clauses can risk the clause becoming unenforceable if it is not appropriate for the particular employee. Employers must consider different restrictive covenants to ascertain whether or not they are relevant for a particular staff member. Careful consideration in this area is needed.
Gardening leave as part of the contract
So called "garden leave" is a term often bandied about. It often refers to a contract term that provides the employee will, for a certain period of time during their notice period, still receive pay and benefits. During that time, the employee, whilst not actively working unless requested to do so by the employer, is not be able to take up employment with a competitor because they are still an employee.
Gardening leave is essentially a way of restricting the activities of an employee. It keeps them "out of the business" and away from key contacts during their notice period. To have an employee on garden leave, it is preferable for there to be an express clause in their contract.
Need further guidance?
Restrictive Convents & Use of LinkedIn
Case Study by Susan Mayall
A problem arose for a client this week which will be of interest to employers. This client encourages its employees to actively network and use LinkedIn and other forms of networking and social media, with the aim of attracting more customers and being visible to current and potential clients. Read full Case Study here