Employment Law SOS: Retaining manufacturing know-how
1 min read
Q We are a small business that has recently won a sub-contract deal for a major client. Can we introduce a new term into our employment contracts to forbid disclosure of any information on manufacturing processes to stop competitors trying to pinch our people?
It is an implied term in all contracts of employment that employees will keep their employer's trade secrets confidential and not disclose them to any third parties including rival employers. Such trade secrets may, depending on the circumstances, include innovative manufacturing processes.
Despite having an implied term in all contracts of employment, it is always advisable for an employer to have a signed document setting out their employees' obligations in relation to confidential information. Legal advice should be sought as to the precise wording, as documents which are drawn too widely will not be enforceable. Key for employers is the identification of what amounts to a trade secret.
To prevent employees being poached by competitors, a different type of protection will be required in the form of post-termination restrictive covenants. Such restrictions can prevent employees working for competitors for a period from between six to 12 months. However, the employer must prove it has a legitimate business interest to protect. Knowledge of an innovative manufacturing process may not be sufficient to justify enforcing a restrictive covenant. Again, legal advice should be sought as this is a specialist area.
If employees refuse to enter into the confidentiality agreements, then again depending on the circumstances, this may amount to a fair reason for terminating employment.
