When writing your employment contracts, it is important to consider what provisions should be put in place to protect your business both during employment and after your employee leaves the organisation. Your business assets include company property, client lists, contacts and suppliers, amongst others. So, what should be included in an employment contract to protect your business assets?
Confidentiality clauses in employment contracts
Confidentiality protection is key both during and after employment of an individual. Whilst there is some implied confidentiality protection, it is limited in scope. It is far better to have express confidentiality provisions within an employment contract both during and after employment. These provisions might also be called non-disclosure agreements. Confidentiality clauses are used to protect confidential information, trade secrets and/or intellectual property related to the business. You would also expect provisions to cover the return of company property, including laptops and phones, which would likely tie in with your IT policies.
Garden leave clause
Putting an employee on garden leave for all, or part, of their notice period could be a vital tool to help protect your business assets from an ex employee. Garden leave can be used if you have concerns an employee is joining a competitor and you want to limit their exposure to the workplace in their final weeks with the business. Garden leave can also be used as a general tool to keep someone out of the marketplace for a period of time. If you have a disgruntled former employee, it can be a way of limiting damage to your business if they cannot enter the workplace.
Post termination restrictions and restrictive covenants
Post termination restrictions prevent an employee from doing something after they have left their current job role. They may be used to prevent an ex employee from joining a competitor for a period of time after leaving your business; these are called non compete clauses.
Other common restrictive covenants in employment contracts include non solicitation and non dealing with clients or suppliers. "Solicitation" involves action or effort on behalf of the employee to reach out to contacts or suppliers in order to connect. "Dealing" relates to a contact or supplier approaching the employee, without having been contacted by the employee themselves. This would typically be written into an employment contract as two separate clauses.
Restrictive covenants in employment contracts can also cover non poaching of employees, so that a former employee cannot approach other individuals still employed within the business to encourage them to leave or join another organisation. This could cover all employees, which is particularly pertinent in small organisations where the stability of the workforce needs to be protected, or an identified group or level of employees within a business.
How long do restrictive covenants last?
There is no standard length of time that a restrictive covenant or post termination clause is expected to last. They can be anything from a few months to several years. However, it is important to avoid the temptation to make them as long as possible and to consider the role of the individual these restrictions are being applied to. For example, someone who holds a significantly senior position within a business is likely to require longer restrictive covenants than someone in an entry level position.
You must continually review restrictive covenants in employment contracts as they may change when an employee is promoted. It is important to check with restrictions in employment contracts are still appropriate for the position your employee holds.
Enforcing restrictive covenants in employment contracts
Make sure your employment contracts are signed by all relevant parties. If any signature is missing from any part of your contract, you may have trouble enforcing the restrictions you have put in place. If you are updating your employment contracts as part of a general contract update, ensure you are receiving something in return which confirms those restrictions have been accepted by your employees.
Key points to take away
- Make sure you have adequate contracts in place for all your employees
- Ensure any restrictive covenants are appropriate for the role and seniority of each employee
- Check that any post termination clauses adequately protect confidential information in case things go wrong
- Remember, there is no "one size fits all" approach and you must review your employment contracts on a case by case basis
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.