UK: Top 10 Tips For Protecting Your Business From Its Employees

Last Updated: 15 October 2012
Article by Blair Adams

Many businesses rely heavily on intangible assets such as client and customer relationships, market reputation, confidential plans, accumulated knowledge, genuine secrets and intellectual property. When employees join and leave, the bonds between employer and employee can be at their weakest and, as a result, these assets can become vulnerable. Here are 10 tips for protecting your business.

1. Investigate new recruits
Due diligence on new recruits is important and can include verifying the information on their CV and vetting their social media or internet profile. Such pre-employment checks are permitted, but are subject to the Information Commissioner’s Code on the application of the Data Protection Act 1998.

2. Take care with the offer letter and employment contract
Employment documents need to be precise about the terms and conditions offered. They must distinguish between what is an entitlement and what is discretionary or contingent.  It is important to set out all the conditions of an offer (e.g. satisfactory background checks, immigration status) and to make clear what will happen if any of them are not met. The best offer letter is one that is superseded by a comprehensive contract of employment that the employee signs when they join.

3. Address visa and immigration issues
Employees must have the right to work in the UK. It is the employer’s responsibility to check this and to retain copies of the documents that evidence the right e.g. passport.

4. Don’t let the recruit bring information from their old employer
A new employee who uses confidential information or trade secrets that belong to their old employer without permission, whether out of malice or naivety, is a dangerous one. Don’t turn a blind eye if you find that they are doing this as you may bring liability on your business.

5. Don’t blur the IP rights
Intellectual property rights are complex things.  Your business needs to be absolutely clear as to what it owns and what employees can own (which is usually nothing).  Where an employee does invent or create something that is used in your business, you need to understand and document who owns the intellectual property in it and how it may be used.

6. Don’t give away any part of the business without having appropriate legal arrangements in place
You may feel that you want to give employees a few shares in your company, but doing so without a proper share ownership scheme or shareholders’ agreement may lead to serious problems – you may never get the shares back.

7. Think carefully about what restrictions your business needs to put on employees if they leave
Drafting confidentiality clauses and restrictive covenants in an employment contract is a job that requires an employer (and their lawyers) to look ahead and make a judgment about what aspects of their business will need to be protected if the employee leaves. Restrictive covenants should be customised accordingly. “Off the shelf” versions often fail when it comes to enforcement a few years later.

8. Protect your own data
Protecting data from human and cyber risk is a major issue for all businesses. The quantity of electronic data is increasing rapidly and, as it becomes easier to move around, the risks of accidental or deliberate data leakage are ever greater. For more on this, including managing access and “bring your own device” policies, please request a copy of our report “Secure Your Data – Protect Your Business” by contacting Frank Jennings, Head of Commercial, at frank.jennings@dmhstallard.com.

9. Investigate suspicions of misconduct promptly
If you suspect that an employee is leaking data, or preparing to set up in competition with you, it is probably already happening.  You need to be aware of your rights to monitor an employee’s activities, investigate, suspend or discipline them and ultimately terminate their employment.

10. Think about your rights before the employee leaves
The law does protect employers in cases where, for example, an employee has stolen information, failed to comply with the terms of garden leave or breached contractual restrictions by dealing with or soliciting clients. Enforcing these rights can be a complex process, but the best time to think about enforcing them is before the employee leaves rather than afterwards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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