It is always a risk when an employee leaves a company that they may steal confidential company information, because for example, they feel bitter towards their former company after being redundant and want to harm it, or because they want to get ahead in a new potential job.
Often however, confidential information (concerning, eg, trade secrets or business practices), is stolen by ex-employees who are setting up their own company in direct competition to their previous employer and feel such information will give them an advantage and allow them to tempt their former employer’s clients to their new company.
One way employers can protect their confidential information is by writing restrictive covenants into staff contracts. These are termed post-termination obligations since they only come into play once the employee is no longer under contract with that particular employer.
What are the different types of post-termination obligations?
The different types of post-termination obligations are:
- non-compete covenants – these prevent employees working for a competitor for a set period after leaving the company;
- non-solicitation covenants – these prevent employees from forming agreements with former customers for a set period of time;
- non-poaching covenants – these prevent the poaching of former colleagues;
- confidential information covenants – these provide restrictions on the use of confidential information.
Can restrictive covenants be written into all staff contracts?
For these restrictive covenants to be fully enforceable they should only be written into the contracts of those members of staff who have access to this kind of confidential information and hold a high-profile role within the company.
Can I make the covenants as wide as I wish?
It is good practice to make the covenants as specific and as narrow as is possible. If they are too wide the courts may deem them unenforceable.
Review of restrictive covenants on an employee’s promotion
When employees are promoted to a more high-profile position with potential access to more confidential information, employers should review any restrictive covenants in their employment contract to make sure the company is still fully covered.
Safeguarding confidential information
If an employee who is leaving is exhibiting strange behaviour such as spending a lot of time by the photocopier, it may be wise to monitor the employee. This may involve checking records an employee’s email and telephone records. Employers must, however, be careful not to infringe the Data Protection Act 1998 when doing this.
Where an employer suspects wrongdoing of this type, they can to go to the courts and request an injunction or ask the employee to agree to an undertaking that they will discontinue the damaging action.
An employer will need to show on the balance of probabilities that there has been a misuse, misappropriation, or a clear intention to misappropriate confidential information. Accordingly, an employer will have to decide what value the information is to their company and whether the actions of the employee is in fact causing them loss.
It may be good practice to speak to the employee first and in some cases, their new employer (if they are moving to another company rather than setting up on their own). However, this is up to the employer who may decide that the best course of action would simply be to apply for the injunction.
When an employer is seeking an injunction they should submit a statement of case to the court, including witness statements.
The court will then decide whether to apply an interim injunction – this will place conditions on the defendant until the case is heard.
As well as ordering an injunction as the final outcome, the court may also decide to award damages where there has been a breach of fiduciary duty.