The Covid-19 pandemic radically changed working lives. As we return to normality, people are reassessing their priorities in the workplace, whether that be a focus on career, flexibility, or finances. Indeed, EY reported this year that 54 per cent of employees would consider leaving their job post-pandemic if they are not offered some form of flexibility in where and when they work. This indicates fertile ground for employees, and more damagingly, teams, to leave their current employers.
If two or more employees leave to either join a competitor or to set up a new company in competition, this can cause severe damage to employers as, in addition to losing valuable employees, there are associated risks of losing clients and revenue streams. It is therefore crucial that employers have clearly drafted employment contracts, with a keen focus on restrictive covenants, garden leave, and the security of confidential information.
Restrictive covenants are perhaps the best protection an employer can have against a team move. If well drafted and reasonable, they can limit the departing team’s conduct, protect the business, and act as a deterrent to both departing staff and their new employer who could be accused of inducing a breach of contract if they are aware of the restrictions. A well-drafted restrictive covenant clause will provide that the departing employee is required to share a copy of the restrictive covenants with their new employer.
- a non-solicitation covenant to prevent employees from soliciting or enticing customers or clients;
- a non-dealing covenant to protect against the provision of services to customers or clients;
- a non-poaching covenant to prevent the departing team from soliciting other employees; and
- a non-compete clause to prevent employees joining competitors.
The last of these restrictive covenants, the non-compete, is the hardest to enforce as the courts generally view the other three types as more reasonable and as offering sufficient protection to a legitimate business interest should employees leave. However, the courts have recognised that a non-compete provision is sometimes necessary to safeguard an employer’s legitimate interests. This is likely to be the case where it is inevitable that an employee will use confidential information in any future employment as a non-compete will be easier to police.
Alongside restrictive covenants, garden leave provisions can be a useful tool for an employer to use in hindering team moves. If a team decides to leave, the employer might want to prevent the team from performing their regular duties immediately whilst also retaining the employees for the duration of their notice period. Garden leave can achieve these objectives. Additionally, this will prevent the departing team from communicating with clients for the duration of the garden leave, enabling their employer to develop or re-establish relationships with those clients.
With most confidential information now being held electronically, it is harder to prevent this being taken in a team move. Most employers have provisions in their employment contracts to prevent this but this on its own is unlikely to be sufficient. Employers need to take steps to ensure that confidential information is secure within the business. Frequently, departing employees will send soft copies of sensitive information via email instead of physically taking hard copies. Employers need to have monitoring software in place to form an alert system should a member of a departing team attempt to take such information, and this should be bolstered by a properly drafted IT policy that allows monitoring of emails in particular circumstances. Not only will this act as a deterrent, but crucially it will provide employers with evidence of any breach.
Employers should be aware of signs that might indicate a team is looking to move. This can be more difficult to recognise with remote and agile working although typically includes changes in working patterns, more than one employee requesting a copy of their employment contract, and employees emailing confidential information to private email addresses. It is also important for employers to understand exactly why teams want to move (eg, work-life balance, career prospects) so it can address these issues more generally within the organisation if necessary.
Tania Goodman is a partner and head of employment law and Patrick Kilgallon is an associate in the employment law team at Collyer Bristow