A Covenant Education

Article by The Employment Team

Employees are important in any business, but for some they are

crucial to success. There are a number of ways that management can

safeguard its assets, human or otherwise.

While employees are important assets for any business, for some

businesses they are vital – in effect, they are the

business.

Working out how to retain core staff – or ensuring

they don't walk off with confidential information, key clients

or other team members – is a central task of management.

From a legal point of view, what that means in practice is a

necessity for a set of contractual obligations, or 'restrictive

covenants', circumscribing the rights of staff should they

decide to leave. "A robust set of restrictive covenants

post-termination is always an extremely good idea for your key

employees – particularly for those whose departure could

damage the business," says partner Andrea London, head of

employment at Rosenblatt.

Restrictive covenants proscribe the period – of up to

12 months – within which employees cannot either compete

with their former employer, solicit or deal with business from the

company's clients, or poach former colleagues. They also stop

employees from exploiting the confidential information of their

former employer to further their own interests. London says such

restrictions need to be employee-specific and recognise the damage

to the business that could be caused by that employee. "A lot

of employers don't realise that you can't have one set of

'catch-all' restrictions that are applicable from the MD

all the way down to the tea-boy. You should have more onerous

restrictions for your CEO and less onerous restrictions for your

admin staff, if any, taking into account the business interests you

are seeking to protect."

The power of words

According to London, the wording of employee contracts is

particularly important during the current period of uncertainty.

"Employers seem to be getting increasingly litigious when it

comes to protecting their client base, their workforce and their

confidential information," she says. "Losses or business

damage in the current market would cause them significant

problems.

We have seen a rise in litigation recently and the cases

do not appear to be settling so easily. Injunctions and expediated

trials are becoming increasingly common.

London recently dealt with a case involving a senior employee

who (while on gardening leave) claimed that his notice period was

significantly less...