Managing the departure of employees or members from an LLP is often a distraction from running the business. However, some concerns are too important to ignore, like (i) the risk of losing the benefit of years of hard work if a departing employee takes customer lists, models, databases or other confidential information with an intention to use that information to achieve an advantage for himself, herself or a new employer; (ii) where a former employee or member acts in breach of restrictive covenants, stealing customers and other employees; or (iii) the discovery of fraudulent activity resulting in significant financial loss to the business.
Well-drafted confidentiality obligations and restrictive covenants play a valuable role in any business but key aspects of enforceability are often overlooked – Is confidential information defined? Does the confidential information fall within the categories of information which an employer is legally entitled to protect after termination? Do the covenants go further than was reasonably necessary to give effect to the business needs when a contract was entered? Is there evidence of misuse of confidential information or persuasion in relation to an alleged breach of a non-solicitation of customers clause?
Having significant experience in acting for both employers and firms (in bringing) and employees and partners (in defending) unfair competition actions, we are well placed to advise on claims involving breaches of restrictive covenants, fiduciary duties (enhanced duties owed to employers in certain circumstances during employment or by partners), misuse of confidential information and bringing or defending injunction applications. Employers must act strategically and quickly to stop unlawful competition before their business suffers irreparable damage. However, recent cases (where hefty costs orders and the loss of business which followed an unsuccessful attempt to enforce restrictive covenants) serve as valuable warnings for employers and firms intending to litigate and demonstrate the importance of getting reliable advice from the outset. Competing former employees or partners must consider their options carefully.
Costs often run up quickly in these cases, which frequently involve a speedy trial. This makes our straight-talking approach (discussing prospects, costs and other options) invaluable.
Our experience also involves dealing with team moves, where claims may involve senior team members recruiting their former colleagues, allegations of breach of fiduciary duty, conspiracy and inducement of a breach of contract by a new employer. For individuals considering such activity, strategic advice prior to setting up in competition or joining a competitor is a must, see Moving to a Competitor.
Our lawyers’ experience includes:
- defending a director of a marketing services and public relations group of companies against allegations of breach of fiduciary duty and conspiracy which concluded in settlement at a pre-action stage
- advising on “team moves” in the professional services sectors, in all cases facilitating the move without the need for litigation
- successfully conducting settlement negotiations after obtaining injunctive relief (including an order for delivery up of confidential files and to restrain disclosure of confidential information) as part of proceedings against a former director for breach of contract and his new company for inducing a breach of contract
- successfully defending a debt claim by an employment agency and counterclaiming for breach of implied terms and fraudulent misrepresentation following fraud committed by a former employee.
How Fox & Partners can help…
- we can assist employers to take preventative action by reviewing key employees’ contracts of employment, ensuring restrictive covenants are tailor-made to fit a business’ needs and are reasonable, see Employment documentation and consultancy agreements
- we advise employers and employees who have moved to competitors on the enforceability of restrictive covenants or confidentiality obligations, including the impact of the circumstances surrounding a termination of the contractual relationship on the restrictive covenants
- we collate and test evidence to ensure there is support for any potential action or defence and provide considered advice on the merits and likely costs to enable informed decisions to be made regarding next steps
- we can act quickly to obtain injunctive relief where damages are unlikely to be an adequate remedy
- We act strategically and consider with employers the merit of joining others, including new employers, to any action.
Please call us on 020 7618 2400