Protecting Employers From Breaches Of Confidentiality And Restrictive Covenant

Published date23 December 2020
Subject MatterEmployment and HR, Contract of Employment
Law FirmWalker Morris
AuthorGwendoline Davies, Nick McQueen and Rebecca Jackson

For many employers, confidential information, customer connections and a pool of skilled employees are fundamental to the success of their business. In a world where employees all too frequently jump ship to join competitors or set-up businesses in competition, how can employers protect themselves from breaches (or potential breaches) of confidentiality or restrictive covenant? (Register for our webinar on this topic here).

Restrictive covenants and confidentiality provisions - what are they?

During or following termination of their employment, employees or ex-employees often have the ability to take advantage of confidential information, strategic plans, customer/client details or other important information relating to their employer's business (together, "Confidential Information"), for example to benefit a rival business.

Employees are subject to various implied duties (such as the duty of fidelity) but these are limited in nature and do not generally extend post termination of the employment. It is therefore common for employers to include, in the contract of employment, various express contractual terms with a view to preventing employees from disclosing Confidential Information, competing, soliciting clients and poaching employees. Such provisions are often referred to as restrictive covenants or post-termination clauses.

What are the risks?

There can be various traps for the unwary when it comes to the drafting of confidentiality provisions and restrictive covenants. For example, all too often, contracts seek to provide an absolute prohibition on the disclosure of undefined or loosely defined 'confidential information,' or 'information related to the company's business and finances'. However the courts will not enforce confidentiality provisions which are too vague or broad in nature.

Where obligations relating to confidentiality are not mutual (that is, only the employee is agreeing to them), there is a risk that, unless the employment contract expressly clarifies what consideration is being given by the employer in return for the employee agreeing to any such obligation, the provision could be adjudged unenforceable. (Employers should also be aware that the approach adopted in this regard may have tax consequences.)

Restrictive covenants in employment contracts are generally viewed more strictly than those in commercial contracts (such as those between a seller and a buyer). Unless carefully drafted, they are usually less likely to be regarded as...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT