Employment law SOS: competition from an ex-employee
1 min read
Q Our sales director, who has been with the company for more than two decades and has many valuable contacts, has decided to leave and set up a company that will compete directly with us. Is there anything we can do to stop him or, at the very least, prevent him from stealing our customers?
Check the director's service agreement. Is he bound by express restrictions on what he can do once the employment ends? Such restrictions might prevent him from setting up in competition, poaching clients and stealing your employees. If he is, remind him of those restrictions. Be aware, however, that restrictions that are too wide in their application or duration will be unenforceable, so take advice.
If there are potentially enforceable restrictive covenants, consider whether there are grounds to apply to the High Court for an injunction, to restrain the director from breaching them, or seek contractual undertakings confirming that he will comply with his obligations. This can be a costly process, so balance the pros and cons carefully in advance.
If there are no restrictions, you can't prevent him from competing or poaching clients once his employment has ended. But you have some powerful immediate solutions:
- remind the director that during his notice period he remains bound by his employment and fiduciary duties to the company. These prevent him from competing with the company at this point in time;
- remind him of his obligations of confidentiality and, if possible, monitor his use/disclosure of confidential information;
- place the director on garden leave during his notice period. Check that you have the contractual right to do this and continue to pay him appropriately (this may include commissions he would otherwise have earned – check the service agreement);
- appoint the right person to contact key clients to help protect the company's relationship with them and limit the director's influence;
- terminate access to Outlook and other client databases, and make sure work telephones, laptops and other company-owned equipment is returned.
