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VIEWS: 16 PAGES: 4

									Your Ref:




Dear Caroline and Kelly


I have worked hard over the last 5 years to build up my business. We are about to open our
4th facility and also have a small facility fit out operation.

My right hand man, Jack, has been with me for most of that time. Jack has been privy to
most of my contacts, suppliers and financial information. He has access to my client lists,
knows what sites I am considering, and the prices I’m prepared to pay. He has resigned and
is moving to Shark Storage. They are my direct competitors. I heard rumours at the Paris
SSA Conference that they were going to expand into the fit out side too.

Please help

JILL




Dear Jill

1.     Does Jack have a Contract?

First things first, if he has a written employment contract, or a company handbook, check
what protection you have there.

Does he have a written clause dealing with:

         (i)   confidential information; and
        (ii)   what he can do after he leaves (generally known as post termination
               restrictions)?

If so, in these circumstances, prevention is better than a cure. You can either speak to him or
write to him. Or, in my experience, the best way of focussing his mind would be to arrange
for a formal solicitor’s letter to be sent to Jack, explaining what he is permitted to do and not
do, attaching a copy of his contract and asking him to undertake (promise), and sign an
acknowledgment, that he will fully abide by his duties to the Company.




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You will also make it clear that if he breaches his obligations and the Company suffers
financial loss you will either go to court:

     (a)    for an injunction to stop him (if you win it will be expensive for him as he’ll have
            to pay about 65% of your legal fees plus his own legal fees) and/or

     (b)    to make him account for profits he (or his future employer) has made unlawfully.

It will reiterate that you intend to enforce his post termination restrictions (eg. not to solicit
clients for (x) months or compete for (y) months after his termination date). For example,
you may want to spell out exactly which clients you prohibit him from dealing with for the
period – if they can be easily identified.

2.         Shark Storage

I would recommend a similar solicitor’s letter be sent to his new employers informing them
of Jack’s contractual obligations and your right to claw back profits Shark Storage makes as
a result of Jack’s breach of contract. Most prudent employers will avoid allowing themselves
to be dragged into expensive and time consuming litigation in these circumstances.

3.         What if Jack does not have a contract?

Obviously you have much greater protection if you have a written contract. Without a
written contract it makes it more difficult to protect the Company but not impossible.

During Jack’s employment, even if he was not bound by any contractual obligations relating
to confidentiality, he would still be bound by the implied duty of mutual trust and confidence
which exists between every employer and employee. So you will want to keep him on as an
employee as long as possible. You should not release him early or pay him in lieu.

However, once Jack leaves the company, while he cannot take client lists, he is only under a
very limited obligation not to use or disclose confidential information that amounts to a
‘trade secret’. This would include secret processes of manufacture such as chemical
formulae or designs and is therefore a very high bar to reach, so most generic confidential
information would not be protectable.

It is clearly much safer to make sure that all your employees have a written contract of
employment which contains restrictive covenants and clauses relating to confidential




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information, otherwise as you can see, you only have very limited protection once they
leave.

4.    What if Jack and Shark Storage refuse to comply and are preparing to
      compete?

         (i)    You should ask your solicitor to write a robust letter before action; which
                should set out the fact that Jack is refusing to comply with his post
                termination restrictions (if he has a contract) or that he is using the company’s
                confidential information without authorisation and is passing it onto Shark, a
                direct competitor to your detriment. The letter should set out in no uncertain
                terms that you will not hesitate to take both Jack and Shark to court if
                necessary.

         (ii)   You would then ask him to sign an affidavit setting out exactly what
                information he has taken and who he has sent it to. As an affidavit is a
                promise or undertaking to the court if Jack doesn’t include everything that he
                says he does, he may be found guilty of contempt of court which is a serious
                offence and the ultimate sanction is imprisonment.

      (iii)     You can apply to the court for a search order if you think Jack has stolen or
                downloaded your client database for example, or pricing structures and future
                facility sites, onto a computer or other electronic device. This order would be
                made without notice to Jack and would allow you to search any property (his
                home or a relative’s home) where you thought the computer or device might
                be. However this order is expensive and draconian so should only be
                considered as a last resort.

       (iv)     If you find that Jack and/or Shark is still using your confidential information
                (or Jack is in breach of any post termination restriction), you can issue
                proceedings against him in court. You would want to stop him using your
                information (or competing) as soon as possible so you could apply for an
                interim injunction in the meantime. Be warned that if the judge decided at the
                trial that the interim injunction should not have been granted, you would have
                to compensate Jack for any loss that he had suffered as a result. Therefore, it
                is not a step to be taken lightly.


5.    Don’t set a dangerous precedent




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If other staff know you will scrupulously guard the Company’s confidential information (and
go after any employee who misuses it, or breaches post termination restrictions), in our
experience, if you show that you will throw the book at miscreants, you will be less likely to
be messed around in future… by employees or competitors.

Yours sincerely



Caroline Doran and Kelly Tinkler
Employment Group and Dispute Resolution Group
Rooks Rider, Solicitors
cdoran@rooksrider.co.uk and ktinkler@rooksrider.co.uk

The content of this article is provided for information purposes only and does not constitute
legal advice. It is not a substitute for obtaining legal advice on a specific query and is not
intended as such. Whilst every reasonable effort is taken to ensure it is up-to-date no
responsibility is accepted for any consequence of relying on it.




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