Case Study:
Clear and present danger

A senior member of your sales team announces that she is leaving to join the opposition at a critical time in your growth. How can a company protect itself in this event and what steps can you take in damage limitation?

Lesley is XYX Ltd's marketing manager. She has just handed in three months' notice and advised the company that she is leaving to join its bitter rivals. Lesley has access to the company's customer and pricing lists, both of which are extremely confidential. She has also developed close relationship with some of the company's best customers and it is believed that she will try and persuade them to leave with her. How can the company prevent, or at least minimise, the possibility of the confidential information falling into its rival's hands? Can the company prevent Lesley poaching customers when she leaves?

Answer:

All staff should have clauses in their contracts of employment clearly specifying information that is considered confidential and undertaking to keep such information confidential post employment. Given the difficulty of policing such a clause post employment, XYX Ltd. should consider, certainly for senior staff, including restrictive covenants in the contract. Such covenants can seek to prevent departing staff for poaching customers or in some cases even working for a rival company for a set period of time.

In the absence of such a clause, there is nothing to prevent Lesley joining the competitor company and actively seeking to poach customers. Whilst she may not copy customer lists or pricing lists, XYZ Ltd. is unlikely to be able to prevent her from using any information gained in her employment.

XYZ Ltd. does however have the option of placing Lesley on "garden leave" for her three month notice period. During garden leave, Lesley will remain XYZ Ltd's employee (and hence subject to the implied terms of confidentiality and trust and confidence) but will not be required to actually attend work or have any contact with customers. Although it is preferable to have an express garden leave term in the contract, this is not always necessary. Keeping Lesley away from XYZ Ltd's customers for the notice period will hopefully allow the company to meet with the customers that Lesley normally deals with and keep them on board despite Lesley's departure.