Protect Your Business Put Restrictive Covenants in Place

Peninsula Team

January 13 2012

“One of my former employees has set up their own company and he is using my client & data list to market his services. What can I do from a legal point of view?”

The action that you’re able to take against your former employee will depend on (1) what was in their contract of employment and (2) whether the information that they are now using, in their new business, can properly be regarded as “confidential information” that is capable of being protected.

If there is an express confidentiality clause in their contract that amounts to a prohibition on the use of confidential information, and if you can prove that the information that they are using is actually confidential i.e. it amounts to something akin to a trade secret, then you are going to be in a much stronger position to protect your business.

First of all you need to get some evidence. Ask your clients, who this former employee has approached, to send you an email, confirming not only the approach, but also their use of your company’s confidential information. Names and addresses of your customers, their email addresses and/or contact telephone numbers will not amount to confidential information. This type of information is readily available through Google, the customer’s website or LinkedIn. What you need is to gather together evidence that they are actually using information (for their own commercial advantage) that could not be readily ascertained from such outside sources. Information which is not only confidential but also proprietary in nature, such as your customer’s specifications; their unique requirements; and their agreed pricing structure and discounts etc.

Armed with that information you, or a Solicitor acting on your behalf, should then write to them (with conviction) telling them that they are in breach of their contract of employment. And, in the letter, require them (1) to give back the confidential information that they should not have removed and (2) sign an undertaking agreeing in the future to abide by the terms of the contract. And should they fail to respond then you would be at liberty to issue proceedings against them.

But if you are not able to rely upon explicit obligations of confidentiality in a contract of employment, then you are going to have to rely upon implied obligations of confidentiality, which are a great deal more difficult to enforce through the Courts. Hence the importance of ensuring that you have sharply designed and carefully drafted confidentiality clauses in your employment contracts, which clearly set out the categories of information that are to be protected, and which should also include an obligation upon the employee to return all such information upon leaving.

Such clauses should also be refreshed regularly to reflect either an employee’s promotion within your company, or your progression as a company, so that they are still seen as fresh and relevant.

Of course, preventing a former employee from using confidential information against you may only be half the battle. You may also want to stop them from competing against you altogether, and from “stealing” your customers, irrespective of whether they are using confidential information to do so.

If that’s the case, then the well-established principal is that such post termination restrictions are unenforceable on the grounds of public policy, unless they go no further than is necessary to protect your legitimate business interests. But if your contracts are silent, and you haven’t asked your employee to sign up to specific post termination restrictions, that are capable of being enforced, then there is nothing that you can do to restrain a former employee from competing against you.

Another sound reason to seek Peninsula’s assistance and guidance, so as to ensure that your business is properly protected from the actions of former employees.

For any further help, please call our 24 Hour Advice Service on
0844 892 2772

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