Steps to protect your business when an employee leaves - Part 2

Our previous article summarised steps a business can take to protect itself. This time we look at the remedies available to employers who suspect that their business is under threat from a former employee and the factors to be considered.

What does the contract say?

Check the employment contract and consider whether the conduct that is threatening your business is in breach of the express post-termination restrictions (“RCs”). If it is, then you should immediately seek legal advice. Bear in mind that various terms can be implied into an employment contract (e.g. the implied duty of fidelity, fiduciary duties etc) in addition to what is set out expressly. On the other side of the coin, however, not all RCs will be enforceable (i.e. no wider than reasonably necessary to protect your legitimate business interests).

Consider potential remedies

The primary remedies in situations like this are to:

• Pursue undertakings/the return of confidential information (delivery up)
• Seek an injunction to stop the employee from
  • breaching their RCs/contract or 
  • benefiting from an unfair competitive edge flowing from a breach of their RCs or other contractual terms.

The sooner you apply for an injunction the better your prospect of success will be, as the court will seek to preserve the status quo. Injunctions are of little value (and hence unlikely to be granted) if the damage has already been done.

Undertakings/Delivery up of confidential information

The first port of call is usually to send a shot across the bows and seek undertakings from the employee/competing entity and/or delivery up of your confidential information.

Injunction to enforce RCs/Springboard Injunctions

If that fails, or if the matter is particularly time sensitive, you can apply to the High Court for an injunction to enforce the RCs/contractual terms. This course of action will depend on the contract terms and enforceability of the RCs, but could potentially prevent the employee from:

• Competing with you
• Soliciting your clients/customers
• Dealing with your clients/customers
• Using your confidential information

The Court can also grant an injunction specifically to stop the employee from unlawfully using your confidential information to gain an unfair advantage.

Injunction to enforce garden leave

It is also possible to obtain an injunction to enforce garden leave provisions. In some fast-moving industries/sectors this might be all that you need to protect your business. It can also be a helpful tool in the absence of express/enforceable RCs in the employment contract.

Factors to bear in mind

All litigation carries risk and injunctions do not come cheap. Before you pursue an injunction, you should consider and weigh up and number of factors:

• The nature/extent of the likely harm to your business
• Whether damages (financial compensation) would be an adequate remedy (in which case an injunction is unlikely to be granted)
• The financial circumstances of the employee or the competing entity
• Whether your business is willing/able to give the required cross undertaking to compensate the employee/competing entity if it is later found that an injunction should not have been granted.

Summary

If you are faced with a competing former employee, you should urgently seek legal advice to improve your prospects of limiting the damage to your business.