This could happen to any business. In this case, it’s a recruitment company, Recruit4stars. The company was set up ten years ago and Ima Moneymaker started out as an administrative assistant. However, she turned out to have exceptional recruitment skills and quickly made her way up the ranks and was promoted to head recruiter two years ago. Ima handed in her notice a month ago and said that she wanted to move to pastures new.
Recruit4stars has just discovered that Ima has been offered a job by another recruitment agency around the corner, SuperRecruit. Ima is an avid user of social media and has over time added all her client contacts to her LinkedIn account. Recruit4stars is concerned that SuperRecruit will now be able to make use of these.
What can Recruit4stars do to protect its position in the market place?
Look at the contract of employment – are there enforceable post-termination restrictions?
Unfortunately, Recruit4stars gave Ima a basic statement of terms and conditions when she started with them in 2005. These were not updated when she was promoted and do not contain any post-termination restrictions.
If Recruit4stars had provided Ima with a contract of employment which included well-drafted restrictive covenants, it could have prevented her from working for a competitor for a certain period after her employment ended. Recruit4stars could have reminded her of these covenants and ultimately applied to the Court for an injunction to prevent her from working for SuperRecruit at the time she resigned.
Although there is a general rule against post-termination restrictions being enforceable because they are a restraint of trade, well-drafted restrictions taking into account all the circumstances of the business are likely to be enforceable.
Consider garden leave.
Ima has 10 weeks’ notice because that is the minimum she is entitled to under statute. Recruit4stars could have agreed a longer notice period with her when she was promoted, but it did not do so. It also did not make provision for putting Ima on garden leave.
If Recruit4stars had agreed a longer notice period, this would have enabled Recruit4stars to keep Ima out of the grips of her new employer for a longer period; garden leave would have allowed Recruit4stars to have taken her out of the market place for that time. This would enable Recruit4stars to build relations with her clients and candidates; confidential information may also start to become stale. Therefore, whilst it may still be possible to put Ima on garden leave, the shorter notice period means the benefit of so doing will not be as great as would have otherwise been the case.
Consider the LinkedIn account.
The law in relation to LinkedIn and contacts made during employment is a developing area. Unfortunately for Recruit4stars, the following do not assist them:
a) Ima set up her LinkedIn account on her own initiative and has a mixture of personal and business contacts.
b) Recruit4stars does not have a social media policy and has never given Ima direction about what it expects her to do with her LinkedIn account.
If Recruit4stars had:
a) introduced a social media policy which set out its expectations in relation to LinkedIn; and
b) included a clause in its contracts of employment setting out that any contacts made during the course of employment belonged to them,
it would be in a better position to prevent Ima from using those contacts.
As it stands, Recruit4stars would probably be able to dismiss her for gross misconduct if she tries to use contacts for the benefit of SuperRecruit while she is still employed by Recruit4Stars, but if she only carries out work for SuperRecruit when she is employed by them, there is little Recruit4Stars can do.
Three months later, SuperRecruit has increased their turnover by 25% and Recruit4stars has watched its turnover drop.
It could have been so different …
Recruit4stars would have been in a strong position when they discovered Ima’s plans if they had the following:
- Specially drafted post-termination restrictions, garden leave, intellectual property and confidentiality clauses in the contract of employment.
- A social media policy and/or contract clause relating to how contacts made through LinkedIn and Facebook are treated at the end of employment.
- A longer notice period.
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This case study is not based on any existing business and is a fictional scenario based on elements upon which we have advised over many years.