There is nothing more horrible that an employee leaving your business in a nice amicable way to find out a few months later that they have set up in competition and hitting your client list – ouch! I was really lucky for 15 years… but even my luck ran out last year when not one… but two of my team did this. Aside from the emotional frustration you often feel – as you have no doubt invested a lot of time and effort in developing these people, supported them through a pandemic, been their shoulder to cry on when they have had personal issues… the list goes on. But there are the financial implications this may have on your business if you do not protect yourself. It truly baffles me when people become so bitter and lack the integrity that you mistakenly thought they had. I have always been incredibly confident in the service I deliver, so have never needed to undercut or try and poach my competitors’ clients.
Every business has information that it considers both integral and invaluable to its success. I would strongly suggest that you ensure you restrict the use of this information by employees after their employment has ended. This can be achieved through the use of restrictive covenants. The majority of the time, having such clauses set out in the contract from the outset will help to deter employees from joining competitors etc.
It is important to make sure that they are reasonable otherwise they will not be enforceable. A post termination restriction cannot prevent trade and cannot be used by an Employer to protect against competition from their ex -employees. Any blanket attempt to deny an ex-employee the right to make a living in their chosen industry or profession is unlikely to be enforceable. However, a restrictive covenant will be enforced and upheld if you can convince a court that;
-It is designed to protect your legitimate business interests; and
-it extends no further than is reasonably necessary to protect those interests
The clause can be used to protect a legitimate business interest, e.g., client details, confidential information or your current employees. I personally never mind a bit of healthy competition; it keeps you on your toes and makes you sharpen your saw. It is just the underhanded, desperate tactics that you want to nip in the bud when an ex- employee starts to become a bit of a nuisance.
What are the different types of restrictive covenants?
They mostly fall into the following categories;
Non -competition covenants
This seeks to prevent an employee from working for a competitor for a set period of time after a termination of employment. This is usually between 6- 12 months. Any period longer than this is unlikely to be enforceable.
Non-solicitation of clients covenants
The non-poaching restrictive covenants aim to stop employees having contact with your clients/customers.
Non-dealing covenants
Which prevent a former employee from dealing with former clients/customers/suppliers, regardless of which party approached the other.
Non-poaching covenant
This refers to the non-poaching of former colleagues.
I would strongly suggest that you take advice on any restrictive covenants that you would like to apply and make sure they protect and are fit for purpose for your business. In addition, it is important to make sure you have good IT systems in place. I found this to be invaluable when investigating what confidential information had been taken.
I have been really humbled by the protection and loyalty of my clients. I think it is safe to say that most like- minded business owners don’t like distasteful tactics and can see right through them. Nevertheless, I just wanted to share my recent experience to ensure that you too protect the business that you have worked hard for.
If you would like to discuss this topic further or need some guidance, please do not hesitate to contact the HPC team on help@highperformanceconsultancy.com.