Go, walk out the door but don’t go anywhere
One of the concerns for a business when somebody leaves is whether the employee will set up in competition with them, solicit orders from their clients and entice employees to work for their new company. The most common way for a company to stop this from happening is put a restrictive covenant into the contract of employment with some of them going on to obtain injunctions to stop the employee working for the new company or setting up in direct competition. However the Government is considering proposals to ban (or severely restrict), the use of contractual clauses that restrict where and how employees can work after leaving their employment and has started a consultation process on non-compete and non-solicitation clauses which is due to close on 22 May
If the proposals go through, it could mean that any restrictive clauses will have to be watered down or removed from the contract of employment. Whilst the proposals are still only at the consultation stage, restrictive covenants in contracts can still be non-enforceable by law. So what can a company do to protect itself:
With regards to restrictive covenants, you also need to consider them when employing new people as they may be subject to restrictive covenants which could impact on their ability to work for you including starting with you or completing certain tasks. You should always check with a prospective employee if they are subject to any restrictive covenants which could leave you, the new company liable for a claim of damages from their previous employees.
Please contact HPC if you want further advice on how to protect your business when an employee leaves your business or if you would like for us to review your restrictive covenants for your key staff.