Protecting your business from employees who resign

Key employees who work directly with clients and have access to confidential information can pose a risk to a business when they choose to leave. It is crucial that you do what you can to protect your interests.

If not, departing employees could have a devastating effect on your business. The only enforceable way to protect your business is to include well drafted restrictive covenants in an employee’s employment contract. If there are no such clauses, an alternative way is to ask them to sign a Settlement Agreement (formerly known as compromise agreements) containing such clauses when they leave.

Well drafted restrictive covenants can be used to prevent former employees from dealing with your customers/suppliers and from trying to entice business away from you. In addition, they could stop former employees encouraging other key workers to leave or from disclosing your trade secrets.

For any covenant to be enforceable, it must be reasonable and it must protect a legitimate business interest. This means that the covenant must go no further than is necessary to protect your business. If a covenant is viewed as unreasonable then it will be void and unenforceable. They must also be limited to a set period of time and if possible, be limited to specific geographical area.   

The benefits of reasonable restrictive covenants is that, first of all, they are a deterrent. However, if they are breached by a former employee, then there are various remedies available to you. The most important of such remedies is an injunction which prevents the former employee breaching the covenants. This provides the quickest method of protecting your business. An alternative remedy is damages which would seek to put you in a position you would have been in had the breach not occurred. 

If you would like advice regarding restrictive covenants, speak to Harrowells' specialist employment team.