Category Archives: Employment Contracts

Hard Work Needn’t Be It’s Own Reward!

GulliverImageThis is an article designed to ensure that all the hard work applied to building your business does not exit with your departing employees!

Even with the most effective engagement strategy, employers will not please all of the people all of the time. For this reason, it is paramount for employers to have strategies in place to protect their business if key employees leave.

There are many ways in which an employer may protect its business, and choosing the most appropriate (which is likely to be a combination of the areas below) will depend on the type of work that is carried out and the industry sector in which the employer operates. Post-termination restrictions and confidentiality clauses are commonly used, but employers should also consider the potential impact on their business of the use of social media including LinkedIn and Facebook.

POST TERMINATION RESTRICTIONS

Post termination restrictions, also known as restrictive covenants, should do what their name indicates; restrict employees’ activities after their employment has ended. Usually, these restrictions are contained in Contracts of Employment and fall into three categories:

  • Non-Solicitation of employees/clients: this essentially means that the employee is agreeing not to contact the employer’s clients (or possibly potential clients) to obtain business from them and/or agreeing not to poach their former colleagues;

  • Non-Dealing: this means that the employee is agreeing not to do business with clients (or possibly potential clients); and

  • Non-Competition: this is the most difficult type to enforce because of its restrictive nature, but in essence means that the employee is agreeing not to work in competition with the employer.

The key point to remember with post-termination restrictions is that there is a general rule that they cannot be enforced because they are contrary to public policy as an unlawful restraint of trade, unless the employer can show that:

  • it has a legitimate interest that it is appropriate to protect (for example, trade connections or confidential information); and

  • the protection sought is no more than is reasonable.

The public policy rule means that it is very important that post-termination restrictions are carefully drafted. To ensure there are strong prospects of enforcement, consideration will need to be given to (amongst many other factors):

  • the seniority of the employee;

  • the length of time the restrictions last for after termination;

  • what is meant by “clients”; and

  • whether there is any limit in terms of location.

Employers should also pull together as much information as possible about the job that the employee carries out and where they fit in the structure of the business to obtain the most accurate advice on suitable post-termination restrictions.

Thought should also be given to garden leave clauses, which can be very effective; such clauses have the effect of taking the employee out of the “marketplace” during their notice period.

CONFIDENTIALITY CLAUSES

Often employers consider information and knowledge to be fundamental to their business and even well-drafted post-termination restrictions will not sufficiently protect this. Such information and knowledge could include a secret recipe or formula, a list of key business contacts and customers, or specialised IT systems and data which, if disclosed to a competitor or to the general public, could cause damage to their business.

Although “trade secrets” can be protected without having a particular clause in the Contract of Employment, most information, although vital to an employer, will not be considered a “trade secret.” For this reason, confidentiality clauses are commonly included in Contracts of Employment.

Advantages of confidentiality clauses include:

  • they are more likely to be enforceable than restrictive covenants; and

  • they can last much longer than post-termination restrictions.

A good confidentiality clause will protect the business both during and after termination of the employee’s employment, and should set out what type of information is considered to be confidential.

We advise that a confidentiality clause is included in all Contracts of Employment, Service Agreements and Consultancy Agreements.

DATABASE RIGHTS AND SOCIAL MEDIA

Although a confidentiality clause might include reference to databases being confidential, increasingly often we see problems when a dismissed employee seeks to use a database of contacts that he or she has built for the purposes of their work, using social media tools such as LinkedIn or Facebook.

In the information society, databases are simply modern forms of property. A database is often such a valuable asset that businesses are increasingly looking to exploit them in their own right. Many employees will be engaged in producing databases, whether as their main role, or in adding contacts for the purposes of developing the business.

The general rule is that the employer is the owner of the database if an employee has created a database during the course of his or her employment, but this is a developing area of the law when linked to social media. If an employee has used social media to create a database, it will depend on the circumstances as to whether the employee or the employer is considered to be the owner of the database and what the employee can do in relation to contacts made. For this reason, we recommend:

  • setting out rules about the use of networking accounts and how contacts should be recorded and used. This could be by way of a social media policy and/or in the Contract of Employment; and

  • including a clause setting out details of intellectual property rights in the Contract of Employment.

ACT NOW

In summary, to protect their business, employers should:

  1. Get existing Contracts of Employment, Director Service Agreements and Consultancy Agreements reviewed;

  2. Obtain advice on specialist drafting of post-termination restrictions, garden leave, intellectual property and confidentiality clauses; and

  3. Put in place a social media policy and/or contract clause including relating to how contacts made through LinkedIn and Facebook are treated at the end of employment.

Please contact us if you have any queries about how to protect your business, or indeed if you want to find out if you can take advantage of a competitor’s failure to sufficiently protect its business when you want to hire its employees!

Are You Ready For The Changing Face Of Employment?

FG DSC_0545Just a few months into 2017, emerging alternatives to traditional working patterns and arrangements are raising a number of interesting questions about the future direction of employment law.

Employers now operate in an employment arena where short-term contracts are commonplace and temporary positions and
freelance work is the norm!

While this operates to provide greater freedom and flexibility in relation to work for individuals concerns are starting to emerge that for some employers it creates opportunities for exploitation. The legislature and employment law courts now have a critical role to play in ensuring clarity and certainty for employers and individuals alike in avoiding unintended consequences.

Informal ways of engaging workers has existed for decades but arguably, technological advances make it easier for the informal workforce to tap into the mainstream working environment. This has led to concerns about employees within formal work patterns being disenfranchised and experiencing a gradual erosion of rights associated with traditional working arrangements.

Lost in the debate about the evils of non-traditional forms of working is the host of benefits that it can bring. Flexibility is the key argument of supporters. The ability of individuals to work whenever they want has a direct impact on earning income without undermining childcare, family obligations and medical priorities. Employers also benefit by being able to optimise resources while at the same time managing costs.

The legislature and the courts now need to provide confidence to business that where they engage individuals with the intention on both sides that they are genuinely self- employed, they are not subsequently declared workers or employees.

The genuinely self-employed do not have employment rights. Workers, a creation of European law enjoy fewer rights than Employees but are entitled to receive among other things the National Minimum wage and have a right to paid holiday. Workers can also claim for arrears of holiday pay, which can create very onerous financial burdens on businesses in the event that there is a large group of claimants.

There have been the much publicised decisions in the continuing saga of “employee v worker v self-employed” – this saga is set to continue in the light of the Uber decision that a group of 19 Uber drivers were entitled to receive the National Minimum Wage and holiday pay, being appealed. Whether the recently published Employment Status Review will help organisations determine the question is yet to be seen, but commentators have already pointed out that the review is dated December 2015!

Traditionally, organisations have relied on contracts and policies as a means of plotting a safe passage through the thorny landscapes mentioned above. And, whilst any employment lawyer worth their salt will advise that organisations should ensure they have in place up to date and relevant employment documentation (such as contracts and handbooks), is this enough? Very definitely “no”.  Long gone (if ever it was) is the time that organisations could brandish these documents in a “get out of jail free” way.

The Department for Business, Energy and Industrial Strategy has recently issued a statement which included the following “an individual’s employment status is determined by the reality of the working relationship and not the type of contract they have signed. Individuals cannot opt out of the rights they are owed, nor can an employer decide not to afford individuals those rights. Employers cannot simply opt out of the NLW by defining their staff as self-employed.” A sign of things to come?

For assistance with minimising the risk and guidance on proposed engagement agreements you can contact a member of the team at FG Solicitors on 01604 871143.

FGazette October 2013

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Welcome to the latest edition of FGazette! The quarterly newsletter of Floyd Graham & Co – Lawyers for today’s employers.

Our final edition of 2013 focuses on whether employees have the right to access all areas of their personnel records. Click the FGazette image to read more.

If you have any problems viewing this link, please contact us on 01604 871143 or fgmedia@floydgraham.co.uk