Gardening leave, Restrictive Covenants, Confidentiality & Injunctions
These areas often cause employers and employees to seek help from employment solicitors.
Restrictive Covenants and Employment
Restrictive covenants in employment law are a term in the contract of employment which puts an obligation on an employee not to do certain things after their employment has ceased. For example, a restrictive covenant may oblige the employee not to work for a competitor, not to get business from the ex-employer's customers or even not to work in a particular area. Such clauses can be nine months to one year or more in length, depending on the circumstances. When combined with garden leave clauses, the employee may be excluded from employment in their field for some considerable time. Recent case law has shown the Courts are much more willing to uphold restrictive covenants in employment contracts.
Employees should look very carefully at these provisions when they get an offer of employment, as this is the best time to consider such issues and to potentially renegotiate the contract.
Restrictive covenants are a complex area of employment law, and are only enforceable if they are reasonable to protect a legitimate business interest. So, even if the restrictive covenant on first reading appears wide ranging, it is possible that it is not enforceable. The advice of experienced employment solicitors is of paramount importance to unravel the terms of an employment contract and which obligations are enforceable.
The Courts, when assessing a restrictive covenant in an employment contract, will take into account whether or not the clause is reasonably limited by time or geography and whether it goes further than necessary to protect a legitimate business interest.
In particular a covenant must be no greater than is necessary:-
· Time: it must not last too long;
· Scope: it should relate to matters with which both the employer and employee are directly concerned;
· Area: it must not apply to an area that is wider than reasonable.
If an employee has a proven case of constructive dismissal (LINK) then it would be as if the employer has ripped up the contract of employment and, as such, they will not be able to rely on its contents, including the restrictive covenants.
There is one exception to this principle - confidentiality.
All current and former employees are not allowed to use or disclose information that amounts to a trade secret. This is regardless of the general principle of contract law which provides that a person who is in breach of contract cannot rely on other terms of the contract.
In respect of confidential information that does not amount to a trade secret there are also implied duties. A well drafted employment contract will allow the employer to impose an express term that defines the type of information that is confidential and requires the employee to maintain confidentiality during and after employment. In addition, the employer should take certain steps within the operation of the business to ensure confidential information and trade secrets gain the proper protection. If you employ sales staff or have important information to protect then it is advisable to seek guidance from employment solicitors familiar with this area of law.
Garden Leave clauses allow the employee to remain employed and continue to be paid but not to work, following termination by notice. These clauses are a form of notice and can be highly effective in stopping an employee from working in the office and continuing to build a relationship with clients and customers.
In this situation the employee is not allowed to attend work, contact other employees or clients during their notice period but is to remain "on call". Unless there is an express term in the contract of employment, an employer may not be able to force the employee to go on garden leave, as the employer may be under an implied duty to provide an employee with work. This is dependent on other issues, such as the availability of work, the employee's willingness to undertake the work and whether the employee needs to practice their skills in order to maintain them.
If you are an employee and you are thinking of setting up a business or competing against your former employer, it is advisable to seek the advice of knowledgeable employment solicitors, at the earliest opportunity. Your former employer may seek to enforce the restrictive covenants through the Courts by way of an injunction and damages, with potentially large legal costs consequences against you.
If you are an employer, you need to protect your business by assessing your employment contracts and your procedures to ensure you have enforceable rights. For an audit of your documents or processes, call Andre or Ruth on 0207 854 9098, employment solicitors and partners at Stone Joseph.