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When is it wise to look a gift horse in the mouth?

Beware a candidate bearing gifts of their current employer’s business…

There is a substantial movement of talent between companies at present. The ability to work flexible hours at work or at home, which developed during the pandemic, has led to many employees looking elsewhere for better terms and conditions. This provides employers with both opportunities – and concerns as to the loyalty of their staff.

Although the use by a former employee of confidential information he/she acquired during their time working for their previous company is prevented by law, there are often disputes as to what is and is not confidential. The real danger to a business lies in the loss of its customers and suppliers when staff move on. Valued employees always develop close links to customers and suppliers, and should they leave, your business may be at risk.

How to protect your business

You should ensure that your employees’ contracts contain restrictions on their competing with your business or dealing with your customers and suppliers, should they leave your employment. These must be carefully drafted and introduced so that they are not more than is reasonably necessary to protect your business. If an employee leaves you need to take quick action to enforce these terms and remind the former employee that he/she is subject to them.

Beware of restrictive covenants

But what if someone else’s employee wants to join you and tells you that he/she can bring business with them? You would be wise to be wary; this gift horse can come with a nasty bite if that employee has a contract with restrictions preventing them from either joining your company or from dealing with customers.

There has been a rise in the number of restrictive covenants (which come in different forms but essentially seek to restrict an individual’s actions post-employment), along with an increase in disputes as to what types of restrictions may be placed on individuals.

Should your soon-to-be employee have restrictions placed upon them by their existing/former employer, not only could they be pursued under the terms of their contract with injunctions and damages but if you hire them, you can also be pursued by their former employer for procuring their breach of contract.

The first question you need to ask is whether they have such restrictions. You should also ask to see the contract and take advice before hiring them. It is possible that the restrictions are too wide and unenforceable but that is a judgment call. The downside is that you could be employing members of staff and paying them a high salary but you may be prevented by the court from engaging them for the purpose you intended.

A cautionary tale

Even lawyers get this wrong as became apparent in Law by Design Ltd v Ali. In this recent case a large firm of solicitors found themselves unable to engage the services of a solicitor they employed because she was subject to a restriction preventing her from ‘transitioning’ over £250,000 of client fees from her former employer. She believed that the restrictions were too wide and were unenforceable, but the Judge disagreed and enforced a 12 month restriction against her. This follows several cases where the Courts have been willing to enforce restrictions against former employees. 

Protect your business

You should take advice about how best to protect your own business by having restrictions covering your own staff. As the case above has shown, it is equally important to give careful consideration when looking to hire new staff members bearing gifts, as it may turn out to be an expensive mistake.

If you are looking for legal advice and support on these issues, please get in touch with Hugh Smith, partner and head of litigation at Andrew Jackson Solicitors on 01482 325242 or email hugh.smith@andrewjackson.co.uk

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    Call us

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