Our regular contributor Jim Gannon, pictured, has read with interest the impact that ‘restrictive covenants’ by employers are having on the job market. Businesses are taking a much stronger line on employees who leave and take valuable customer data with them.
In an economic climate which is now forcing businesses to be more competitive in their approach to everything they do, there has been an upsurge in actions against employees who mistakenly believe that what they create for their company, as an employee, is free for them to take with them if they decide to leave. This inherent belief that data, information, client lists and contract information, among other valuable information made known to them or created in the course of one’s employment belongs to the employee in part, rather than the employer, is now the subject matter of some very intensive litigation being taken against employees. Some employees think they can just walk away from their job and join the competition and make use of their previous employer’s secrets. While it is accepted that employees can utilise experience, knowledge and skills developed during the course of a job, taking much else could well result in a solicitor’s letter arriving on their doorstep, threatening legal action if they have breached any of the restrictive covenants contained in their employment contract. Companies are now becoming very protective of the business they have secured through financial investment and hard graft.
Main types
While companies often draft employment contracts to suit their own types of business and spend hard-earned cash on employing legal and HR personnel to give them the very best of advice, to protect their interests, there are three main types of restrictive covenants commonly used by businesses today. There are those that prevent you from approaching the clients of your former employer; and those that prevent you from approaching your former employers staff, with a view to offering them employment. The latter usually occurs when a manager leaves a company and has the desire to take some or all of his team with him. As you will appreciate this could have a devastating effect on any business. The third, and most difficult one to enforce, usually is the restrictive covenant that prevents someone from competing against a former employee, generally in the same field. Generally speaking, courts will normally only uphold such a claim if they feel this is reasonable and would take into consideration knowledge gained while formally employed if that was used unfairly. Restrictive covenants can vary from three to twelve months although the norm is six months and they do carry a tremendous amount of legal weight if abused. While most companies will include these in contracts of employment, they can be in a separate agreement or letter, or even in the employer’s handbook which in most cases is now signed for when starting a job and so employees must be aware of their former employment terms and conditions, before they embark on joining a competitor or even starting their own business in a similar field. Be warned that if you ignore a restrictive covenant your former employee is free to apply for a High Court injunction and claim for damages for loss of business and income.
Best course
Most businesses want employees to leave on good terms and work towards a compromise on exit, with a proper hand-over course of action and its always advisable for an employee to leave, without an acrimonious exit and of course without anything belonging to their former employer. Firms do not want employees, who they have trained and invested in, poaching their clients as soon as they have walked out of the door and quite honestly this makes commercial sense. The problem however will always be that ‘people deal with people’, rather than companies and organisations, and it’s often the personal relationship that finalises a deal rather than just the financial aspect of the transaction. If you don’t get on with someone you are unlikely to want to do business with them, and it’s as simple as that. The difficulty for any employee when he feels his skills and ideas are not being valued by his employer, will cause him to seek alternative employment and this is unlikely to change. As today’s job market shrinks, companies can afford to seek out the best but employees must be aware of the pitfalls if they do not exercise caution. when they ‘look to leap’; otherwise it might not be another job offer letter landing on their doormat.
