Employers – is your business protected?

Employers – is your business protected?

Very often one of the key assets of a business is its employees.  However they can also be one of the greatest threats to a business where relations deteriorate. In this article I will set out some of the measures an employer can put in place to protect its business.

The Importance of the Contract of Employment

Employers are required by law to give employees a written statement of certain terms and conditions of employment.  Some employers view this as a nuisance.  However a contract of employment is of fundamental importance in the protection of an employer’s business.  Such a contract should include the following clauses in the context of protecting the employer’s property and goodwill:

  • Pay In Lieu of Notice Clause – If you are terminating the employee’s employment you may wish to pay the employee in lieu of requiring them to work their notice period.  This will be relevant where there is a concern that the employee will try to damage the business of the employer in some way, for example, destroying or copying company information or poaching staff or customers;
  • Garden Leave Clause – Such a clause provides that the employee may not be required to attend the workplace during the notice period but is still bound by his/her contractual obligations and continues to owe duties of fidelity and loyalty to the employer during that period.  Furthermore the employee cannot enter into alternative employment during that period.  Such a clause allows the employer obtain assistance from the employee during the garden leave period but crucially the employee will not have access to customers or the employer’s systems during that period.  The employer is required to pay the employee during the garden leave period;
  • Confidentiality Clause – This clause can apply during the employment relationship and post termination. Careful consideration should be given to the definition of confidential information.  The definition should be based on the nature of the information the employer wishes to protect;
  • Return of Company Property Clause – Such a clause provides that the employee will, on termination of employment, return all company property, including notes etc in hard copy and soft copy form;
  • Conflict of Interest Clause – This clause is included to ensure that the employee does not carry out work in competition with the employer during the period of employment.  Employees owe duties of loyalty and fidelity to their employer during their employment but often are not aware of such duties.  Accordingly this clause makes that duty clear to them;
  • Restrictive Covenants – The nature of restrictive covenants will vary depending on the organisation in question and the goodwill that it wishes to protect.  Generally employers will be concerned with the non-solicitation of employees and customers.  However employers may also seek to prevent an employee obtaining employment with a competitor.  Restrictive covenants are interpreted very strictly by the Courts.  In order for them to be enforceable they must be reasonable in terms of their nature, duration and geographic scope.  If the restriction goes beyond that which is required to protect the goodwill of the employer the clause is likely to be struck down in its entirety.  Accordingly such restrictions require careful consideration and drafting;
  • Intellectual Property Clause – This clause should make it clear that all intellectual property created by the employee in the course of employment is the property of the employer.  For jobs that involve the creation of intellectual property an employer may also consider having a separate non-disclosure agreement in respect of intellectual property.

IT Policy and Systems

Given that the vast majority of work revolves around IT systems it is vital for employers to have an IT Policy in place.  Such a policy should prohibit the use of portable storage devices which can be used to copy information from the employer’s IT system.  It should also prohibit employees from emailing work related information to anyone other than in the course of their job function. The employer should reserve the right to monitor employees emails and computer usage.  If employers allow employees to use their own devices for work purposes they should reserve the right to conduct an audit of the employee’s device.

Employers should also consult with their IT advisors as to measures that can be put in place to protect information on the employer’s IT system.  Some basic measures would include password protecting documents/files and blocking the use of portable storage devices.

What can you do if you don’t have these protections in place?

If you do not have contracts of employment in place for your employees you should prioritise implementing them now.  Where you already have contracts in place, consideration may be given to varying such contracts.  However you will typically require the consent of an employee to do so. Opportunities may arise, such as, promotion of an employee whereby the promotion, particularly to management level, would be conditional upon entering into a new contract of employment.

IT policies do not typically form part of employees’ terms and conditions of employment.  Accordingly consent is not usually required to amend them. They should be reviewed, updated where necessary and any changes should be implemented in the employer organisation. There is no point in having a policy if it has not been implemented and employees are not aware of its existence.

Where the employee has left employment under bad circumstances and his/her contract did not contain a confidentiality clause or restrictive covenants consideration could be given to obtaining a springboard injunction. A springboard injunction is sought where due to an alleged breach of contract, typically misuse of confidential information, an employee gains an unfair competitive advantage over the former employer. A springboard injunction is sought to cancel out the unlawful start gained by the employee.

For more information on springboard injunctions see Eimear Branigan’s recent article published in the Irish Employment Law Journal — The Springboard Injunction — What Is It? IELJ 2013, 1, 17 — 21. 

Should you have any queries on any issues raised in this article or on employment law in general please contact Laura Graham at lgraham@reddycharlton.ie

Laura Graham
Author: Laura Graham