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Is an employee breaching the restrictive covenants in their employment contract and destroying your business in the process?

Breaches of restrictive covenants are everyday occurrences - could this be happening in your business and are you protected?

Breaches of restrictive covenants are everyday occurrences – could this be happening in your business and are you protected?

So what happens when an employee leaves for a competitor taking not only a database of clients, but also confidential information about the company’s products? We all think it won’t happen to us, but unfortunately the litigation team (as well as colleagues in the employment law team) see this happening quite regularly – let me paint the picture of a typical scenario based on recent experiences.

Meet XYZ Ltd

XYZ Ltd is a successful business in England manufacturing specialist components used in motor vehicles that are sold worldwide. Their competitor ABC Ltd manufacturers similar components, but on a much smaller scale. Within the industry, the perception is that the quality of XYZ’s products is far superior to those of ABC. The method and products used to produce the components is confidential, with only four employees being privy to this information, one of whom is the next character in this tale… Mr Bloggs.

Enter Mr Bloggs

  • Sales and development manager at XYZ Ltd for nine years
  • Has access to the confidential information relating to the components
  • Has highly sensitive and confidential information on customers and clients, including pricing information.

What his employment contract contains:

(1) a confidentiality clause preventing him from disclosing confidential information or commercial secrets both during and after his employment
(2) post termination restrictions (restrictive covenants)

(i) non-solicitation of customers for a period of six months after termination
(ii) non-dealing with clients for a period of six months after termination
(iii) non-compete for a period of six months after termination.

His resignation goes in

On 10th January, Mr Bloggs gives notice of termination of his contract, giving four weeks’ notice pursuant to his employment contract. He explains that he is looking to take up employment in a completely new area and planning on relocating to Wales.

Suspicious activity leads back to Mr Bloggs

After leaving XYZ on 10th February, one of the directors of XYZ discovers on the 12th that Mr Bloggs has (1) removed electronic files of data containing the confidential information on their products; (2) emailed from his XYZ email account to his personal email account lists containing XYZ’s clients and pricing information, and (3) emailed XYZ’s customers notifying them of his departure and new employment with ABC.

Enter ABC Ltd’s latest employee… Mr Bloggs!

XYZ contacted ABC on 13th February, with the phone being answered by Mr Bloggs who confirms he now works for ABC. Understandably perturbed by the breach of his contract and the potential harm to their business, XYZ speak to the director of ABC notifying him of Mr Bloggs’ post termination restrictions. Their fears are confirmed when on 15th February, XYZ are contacted by their main customer, saying they were contacted by Mr Bloggs and the director of ABC, looking to arrange a meeting to discuss the products and services ABC can offer.

Are you facing this type of situation? Act now

The above is happening all too frequently – breaches of employment contracts can destroy the years of hard work you have dedicated to building your business. Now read our blog post on six steps you should take to protect your business. Alternatively, contact me, Gemma Newing, dispute resolution solicitor at Sherrards Solicitors in St Albans, Hertfordshire or call on 01727 832830.

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