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best offer letter is one that is superseded by a comprehensive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.