Challenges can arise in the seemingly most solid employment relationships, especially when it comes to post-employment restraints and the “breaking up” stage, writes Gordon Williams
This is the second of two articles that focus on particular challenges in the employment relationship at very different times. The first article explored the beginning of the relationship and what to do (or avoid) to make sure it starts on the right foot. This article looks at options to protect the company when the honeymoon is over and you’re at the painful “break up” stage. In particular, I’m talking about protecting your business where an employee decides to decamp to a competitor – merrily disregarding all of their obligations to give notice and taking all of your secrets with them.
There are three overlapping areas which, although apparently simple topics, raise all manner of legal and practical complexity, risk and expense. These are:
1. Handling a resignation and garden leave
If you suspect an employee has resigned to join a competitor, you need to think carefully about how you handle it. For example, should they continue working? While this might help with an orderly handover, you’re also allowing the employee ongoing access to your business, your customers and your confidential information.
In most cases, it probably won’t make sense to make a payment in lieu of notice either. That simply brings their termination date forward, meaning they could start working for the competitor even sooner (subject to any post-employment restraints).
That’s where garden leave is useful. In effect, this allows you to isolate the employee from your business (and everything that goes along with it). During this period, they remain your employee and continue to owe all the usual duties, they just don’t come to work. Of course, it also means they continue to be paid and to accrue their usual entitlements.
Before directing an employee on garden leave, though, you need to check their employment contract contains a properly drafted clause; if it doesn’t, a number of issues can arise that may need to be dealt with by the courts.
2. Dealing with electronic theft
Unfortunately, it’s become increasingly common for employees to take their employer’s confidential information on their way out the door – often using technology to do so. So you might want to do an IT investigation just to make sure. It’s also important to secure the employee’s computer. If IT reimages it for use by another employee, then all of your evidence could be destroyed!
Next, you need to decide whether you do the investigation in-house or engage a forensic IT expert. The latter is often the best option, as they will have the necessary technical expertise and are independent (which is important if they’re required to give evidence).
If you discover an employee has taken your confidential information, you have a range of options – from demanding the return of property and undertakings, to court action seeking the return of information, injunctions and possibly damages. Given the importance of the issue, it’s well worth taking legal advice on these options early on.
3. Post-employment restraints
For some roles, a post-employment restraint is an essential way to protect your business from departing employees. Of course, you only get this protection if the employee’s contract includes properly drafted restraints. In practice, at least outside of NSW, this means restraints that go no further than necessary to protect the employer’s legitimate business interests, as interpreted by the courts. Getting this right when you draft the contract is crucial.
I would also recommend writing to the employee to remind them of their obligations when they resign. If you know who the new employer is, you can also write to them to put them on notice.
If you suspect your former employee is breaching their restraints, you need to move quickly. You will usually seek undertakings first. If that’s not successful, your only real option is to approach the court for an injunction. However, with properly drafted restraints and prompt action, there’s a good chance it won’t come to that and your former employee will end up doing the right thing, even if it is begrudgingly.
5 steps to “breaking up”
The break up is rarely pleasant – but if you want to protect your business you need to:
- draft your contract carefully right at the start
- consider whether to conduct an IT investigation
- make sure your post-employment restraints are properly drafted
- act quickly if you believe an employee is breaching their obligations
- if the employee is a real threat – take legal advice early on to map out your strategy
Image source: iStock
