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Six steps to protect your business when an employee leaves

Employee turnover can be a costly business. The cost of recruiting a replacement employee is on average 33% of the employee’s annual salary, according to the Work Institute’s retention report in 2019. And there is onboarding time before a new starter reaches the same level of productivity as a leaver.

The more senior the employee, the greater the impact is likely to be on your business, particularly if that employee could go on to compete with your organisation after they leave. In this article we look at key things to watch out for, as well simple steps that you can take to better protect your business.

Warning Signs

Clearly not all resignations are acrimonious, but there are instances where a business needs to be alert to the risks that it faces such as:

  • employees copying, downloading and/or printing confidential information/data in the run up to their resignation and/or departure;
  • clandestine meetings between the exiting employee and your clients, customers and/or competitors;
  • emails to third parties and/or private email accounts attaching confidential information/commercially sensitive data;
  • removal of hardcopies of confidential information.

Top Tips

When an employee resigns, you should think about whether any of the following steps are necessary:

  1. Garden leave

    If the employee’s contract includes an express garden leave provision, then you should consider using it, especially if you are worried about the exiting employee having ongoing access to your clients/customers and confidential information. You can then keep the employee available to facilitate the handover process whilst restricting access to other areas of the business.  

    A lot of businesses see it as a cheaper option to release an employee early from their notice period, however, you should think carefully before doing this. Whilst an employee may be bound by post-termination restrictions, these are harder to police than an employee on garden leave.


  2. Remind the employee of their obligations

    Review the terms of the contract and, in particular, any post-termination restrictions.  Assuming that the contract contains post-termination restrictive covenants, remind the employee of the nature and scope of those covenants clearly.

    Regardless of whether or not the contract contains express restrictions, there is an implied term of confidentiality. If the employee is to be placed on garden leave, notify your employee that they are also prevented from taking any steps in preparation to compete during this time.


  3. Ask the employee to return all company property

    Employment contracts generally contain an express provision which requires the employee to return any property which belongs to their employer either on request or at the end of their employment. Whilst this provision often covers everyday items such as a company laptop and a company credit card, it should also cover any paper or soft copy documents, as well as any access passes.


  4. Do not breach the employment contract yourself

    Aside from the constructive unfair dismissal risks, if a party (generally speaking) breaches a contract then it will no longer able to rely on the terms of that contract for its own benefit. You do not want to risk invalidating any of the post-termination obligations that you may later need to enforce.


  5. Shut down access to your systems and ask your IT team to review recent activity

    Don’t forget to shut down the employee’s access to your systems and disable all access codes, passwords and/or remote access on their departure or at the start of garden leave, if appropriate.

    You may want to take steps to find out if the employee has been up to no good by reviewing recent email communications, and any unusual file access or downloads. IT teams are generally able to carry out such checks easily.

    If your investigation reveals that the employee has taken, copied or forwarded confidential information and/or has taken steps to poach your business/clients/staff you should immediately seek legal advice.


  6. What to do now?

If you have an employee who has handed in their notice, consider whether or not it would be prudent to take some or all of the steps detailed above.

Even if you don’t have any ‘high risk’ departures on the horizon, there really is no time like the present to review your existing contracts of employment to make sure that they contain the crucial provisions referred to in this article, and to make sure that any post-termination restrictions are carefully drafted with all reasonable precautions to protect your business in mind.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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