We answered questions about employees breaching enduring obligations following termination of their employment for stuff.co.nz.

Q: I've just found out one of my employees has been trying to set up his own company behind my back and I think it would be in direct competition with mine. I also know he has been trying to solicit our clients and one of our staff members. Do I have the right to search his work emails for more evidence? How do I resolve this without it getting messy and ugly?

A: This type of situation is concerning to stumble across and raises a number of issues. For example is the employee potentially in breach of their on-going employment obligations, are they taking confidential information as well as attempting to solicit clients and or staff, and if they leave, is there an enforceable restraint of trade in place to help protect the business?

During the employment relationship, an employee has duties of confidentiality, fidelity and good faith to their employer.

An employee is not prevented from taking some preparatory steps in setting up a competitive business (such as incorporating a company or drafting a business plan). However they must not to do so in breach of their duties to their employer. In this situation, attempting to solicit staff or clients for the employee's new business while still employed is clearly in breach of these obligations.

After an employee has left however, the duties owed to the employer depend on whether there is a reasonable and enforceable restraint of trade clause in their employment agreement. Rest assured though, that the duty of confidentiality survives the end of a person's employment, whether their position is terminated, or they leave of their own free will.

So how best to resolve the issue without things getting ugly?

Keep in mind throughout the process that any action taken to resolve the matter must be in the range of what a fair reasonable and employer could do.

It's then important to first ascertain if there is any weight to the information received.

Usually workplaces will have an internet and email policy which outlines that internet and email is provided primarily for business use and that it will be monitored by the employer from time to time.

Assuming a policy exists, we recommend reviewing the employee's emails and file usage, including to see if there has been work time used for the other business, if there is any evidence of clients being contacted, and if confidential information has been emailed by the employee to a personal email address or downloaded (onto a USB for example).

It may be necessary to consult with the employee about suspending them while further enquiries are made. A decision to suspend will be contingent upon the information and evidence identified at that early stage, the reliability of that information, the employee's level of seniority and the threat to the business created by any alleged breaches.

Once those investigations and enquiries have been made, depending on the information obtained, the matter may result in a disciplinary process. If so, the employer needs to set out its concerns to the employee in writing, and:

  • Provide the relevant information / evidence to the employee;
  • Invite the employee to a meeting to discuss those concerns; and
  • Reflect on the employee's feedback and then following that meeting, having considered all of the information relevant to the matter, decide what disciplinary action is appropriate.

If the concerns above are raised with the employee and the employee has created a business in competition any resulting disciplinary process may spark the employee's resignation.

There are many options available to an employer wanting to protect its business when an employee leaves employment. These options include writing a letter reminding the employee of their post-termination obligations, or obtaining an interim injunction, or search order, or even seeking penalties and damages against the employee for breaching their post-employment obligations.

To explore any of these options we recommend obtaining legal advice on the best strategy for your business.

Read the orginal article from stuff.co.nz here

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.