Protecting your confidential information, staff and intellectual property from walking out that door
What happens when your employees decide that their boots are made for walking, and that’s just what they’ll do? How do you make sure those boots don’t walk all over you?
Loss of confidential information. Poaching your well trained staff. Stealing your business. Targeting your client list. Copying your business model. Taking an invention to a competitor. Using your carefully researched suppliers.
We’ve all seen news articles about “The Great Resignation” – the pandemic related movement of employees. It’s what everyone is predicting. Some of it has already happened. There are plenty of articles about how to motivate and engage staff to prevent turnover. But even if you train your staff, share important confidential information and invest time and money, people may still leave and go and work for a competitor. In most cases, you wish them well. But what if they steal from you?
How do you protect your business? Here are some suggestions.
Firstly, what do your employment contracts say?
Do you have a confidentiality clause that requires employees to keep your confidential information confidential? And to ensure that any confidential information is returned to the employer at any time as requested or on termination of employment?
Do you have clear intellectual property clauses? That make it clear that any intellectual property (i.e. inventions, methods, patents, designs) developed in the course of their employment belongs to the employer?
There are also broad contractual duties such as the duty to act honestly and the duty to act in the best interests of the employer. Have you made these crystal clear?
Secondly, what do you do when someone gives notice of resignation and you fear that they will steal your valuable information and share it with a competitor, poach your staff, or send an email to themselves with a copy of your client or supplier list?
What do your termination provisions say? Do you have clear notice periods that are required to be given when someone signals their intention to resign? Can you put someone on garden leave – i.e. sit them at home, thus preventing them from going to work for a competitor for a certain amount of time, but cut off their access to company information? Is it long enough so that those sales strategies are no longer current? Alternatively, are there clear summary dismissal provisions allowing you to terminate their employment if they have stolen information and leaked it to a competitor?
Do you have restraint clauses? These are clauses that prevent an employee from working for a competitor or from poaching staff. This is a tricky area of law as the law does not allow you to restrain people from doing this unless it is “reasonable” to protect the interests of your business. Restraints are usually restricted by time or geography which may be useful for some information but for e.g. research information that has a longer time frame, may be less useful. To enforce a restraint is a high bar to meet and in general restraints have only been found to be enforceable for very senior executives or those with very niche skillsets or information, for short amounts of time and within restricted geographies.
Finally, what do you do when those boots have walked out the door, and their name pops up on LinkedIn or elsewhere in the same role working for a competitor and you can see that they are using your supplier list, their marketing strategy is the same as yours or your whole team starts following them out the door? Or worse, they have stolen employee information and threaten to sell it on the dark web?
There are a range of responses to this scenario. Firstly, speed matters. Respond quickly but effectively and get advice and support – both legal advice in terms of options, but also whether you need to comply with any statutory reporting requirements, as well as any necessary forensic advice – do you need to seize laptops/cut off access to people/systems? Ideally if you have any early warning signs prior to the information being lost, then act on it. Don’t wait.
In terms of legal options, one option is a “lawyer letter” sent to the ex-employee and their new employer, assuming you have the clauses outlined above about confidentiality, restraints and intellectual property, threatening a breach of such clauses. If this does not stop the conduct, you can apply to the relevant courts to enforce those clauses, including, importantly, an injunction to stop the ex-employee and their new employer from using that information that hurts your business. In more serious cases, you may need to go to the relevant authorities as you will need to comply with mandatory statutory notifications (e.g. for data privacy breaches) or the matter becomes criminal activity (ransom demands, threats to safety).
Boots may be made for walking, but don’t let ex-employees walk all over you.
Remotely Legal can assist employers and boards on all aspects of employment law, including preparing relevant clauses in contracts, advising on appropriate restraint clauses for certain senior employees and advice and enforcement of clauses to prevent confidential information, client lists, supplier lists, staff, patents, trade marks and inventions from walking out the door. Feel free to contact us when you are ready!
This blog is general advice only, please seek legal advice in relation to your specific circumstances
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