What an employee can and cannot do when no longer on your payroll

Jane Lambert














While an employee remains on your payroll he or she is bound by an implied obligation of good faith and fidelity to do his or her best for you. He or she is not allowed to discuss your affairs in public or work for a competitor. As Mr Justice Laddie said in Ocular Sciences Ltd v Aspect Vision Care Ltd (No.2) [1997] RPC 289, [1996] EWHC Patents 1, (1997) 20(3) IPD 20022, that has nothing to do with the law of confidence or trade secrecy.

However, the employee is not your slave. He or she is entitled to seek work elsewhere or even set himself or herself up in business in competition with you. If the employee leaves your employment he or she is likely to use skills, knowledge and experience gained in your employment. There is nothing wrong with that even if you have spent time and money training the employee. After all, you see nothing wring in recruiting someone who has been trained by somebody else do you. Nor is it disloyal of the employee to attend interviews or take preliminary steps to set up a competing business so long as he or she does that in his or her own time or with your permission. If he or she is any good the employee is likely to have made some contacts while working for you. There is no reason why he or she can't stay in touch and deal with those contacts after leaving your employment.

But there are limits. Just as an employee can't steal from you neither can he or she run off with your customer list or use or disclose secret and sensitive technical or commercial information relating to your business that he or she acquired in confidence. The law of confidence applies to a  departing employee just as it would to anyone else and if there is any danger of his or her breaching an obligation of confidence you can enforce it against the employee just as you could against anyone else.

However, confidential information does not usually stay confidential for ever. The time eventually comes when it becomes common knowledge in the industry. The law deals with that by allowing employers to insert garden leave or other non-compete clauses into their employees' contracts of employment to cover the period in which they are vulnerable. But these can't go on for ever or even for an excessive period. Such a clause restricts freedom to trade and it is a fundamental principle of English law that contracts in restraint of trade are not allowed unless they are reasonable for the protection of the parties and in the public interest. The recent decision of the Court of Appeal in Sunrise Brokers LLP v Rodgers [2014] EWCA Civ 1373, [2014] WLR(D) 442 is an example of a case in which such restrictopm were held to be reasonable and were enforced by injunction.

So what should an employer do? First he or she should take professional advice on the drafting or enforcing of garden leave or other provisions before a dispute arises. We can help with that and our clerks will be glad to put you in touch with counsel specializing in employment law if you call them on 020 7404 4242 or get in touch through their contact form. Secondly, you can remind employees of the importance of keeping your business and technical secrets secret and of their obligations of confidence in the course of their employment through training sessions, staff manuals, regular circulars and otherwise. Thirdly, if you have reason to believe that an employee is about to breach his or her obligation of confidence you have to act quickly. Once the information has been used or disclosed there is no point in seeking an injunction to restrain such use or disclosure. You may need to apply for a "without notice" injunction immediately and then follow it up with an application on notice as soon as possible afterwards. It is all a bit hectic and I am afraid it can be expensive but then doing nothing until it is too late can cost you a hell of a lot more.

If you need emergency advice or representation you can come to us through a solicitor or you can come to us direct under the public or licensed access rules. Once the emergency is over we can help you build a legal team. If you want to discuss this article or restraints of trade generally, call me on 020 7404 5252 or use my contact form.

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