The knowledge, skills, and relationships an employee develops over the course of employment is undoubtedly a source of competitive advantage. Yet, employees are not permanent and there will come a time when your employee will leave the business. Your employee’s departure presents the risk of valuable information being brought over to a competitor. Further, your employee can use it to start a competing business. As an employer, there are certain post-employment obligations that you can establish that will protect your business long-term. In this article, we will outline three typical post-employment obligations imposed on an employee.
What is a post-employment obligation?
A post-employment obligation is an obligation that exists even after an employee no longer works for the business. These post-employment obligations are generally set out in the employment agreement. However, you can also establish these upon termination.
Post-employment obligations are not one-size-fits-all. They can be tailored to cover specific interests applicable to the business and the individual employee. Moreover, post-employment obligations can also vary in duration. Some exist for a set period of time (e.g. restraint of trade) whilst others operate indefinitely (e.g. confidentiality).
Confidentiality
The duty of confidentiality prevents an employee from using or disclosing to a third party, confidential information of the business. Confidential information captures information such as business strategies, client proposals, and client contact details. Your employee must comply with this duty of confidentiality during and after employment. As an employer, you can also specify that all confidential information be returned (or destroyed) at the end of employment.
In the event of an actual or suspected breach of confidence, you can apply to the Court for an injunction. An injunction is a court order requiring a person to do, or cease doing, a specific action. In this instance, the injunction will stop the former employee from disclosing confidential information.
Restraint of Trade
A restraint of trade provision works to prevent a former employee from competing against the business. In order for the restraint of trade clause to be valid and enforceable:
- The restraint must be protecting a “legitimate business interest”; and
- The scope of the restraint must be “reasonably necessary”.
What is reasonable will depend on the nature of your business and the specific circumstances at play. Generally speaking, a restraint will be unreasonable if it inhibits a former employee’s ability to earn a living.
Non-solicitation
A non-solicitation provision prohibits a former employee from leveraging relationships established over the course of employment. This includes luring clients and other employees away from the business. The provision should specify the scope of the restricted conduct, its geographic reach, and duration. Similar to a restraint of trade clause, the terms of the non-solicitation provision must be reasonable.
In the event that a non-solicitation clause was not included in the employment agreement, it can form part of the termination letter. It can also operate separately as a non-solicitation agreement.
Conclusion
As an employer, it is important that you draft your post-employment obligations with sufficient clarity and specificity. This will ensure that they are enforceable. You should also review these post-employment obligations and bring them to the attention of the employee upon the conclusion of their employment.
