A significant concern for many recruiters is competition from their former employees. We have all heard tales of employees leaving their jobs and turning up the next minute at a competitor, complete with a list of contacts built up during their previous job. The question is: what legal steps can recruitment companies take to protect themselves from such actions?

General legal protection
Potentially, contact lists can fall within the category of confidential information protected by law. Along with an employee’s general duty of confidentiality, which ceases on termination of the employment relationship, employers can introduce restrictive covenants into employees’ contracts, which would protect their business from the competition.

To be legally enforceable, restrictive covenants must seek to protect a legitimate interest belonging to the business and the protection sought must be no more than is reasonable with regard to the interests of the employer and employee, and the public interest. Additionally, they must be very carefully drafted and, usually, limited by time, geographical scope and the customers they apply to.

Garden leave
Court action to enforce restrictive covenants can be very expensive. Therefore, although covenants are important, recruiters should consider taking other steps. One such step is to insert garden leave clauses in employees’ contracts.

A garden leave clause is one that entitles an employer to prevent an employee from doing their regular duties while they remain an employee. Typically, a garden leave clause requires an employee to stay at home for the duration of their notice period but they must receive their pay and
(usually) benefits. Such clauses typically come into play whichever party gives notice.

The aim of a garden leave clause is to keep an employee out of the marketplace for long enough for them to cease to be at risk of competing
with the employer — for example, for the time it should take the employee’s successor to build strong relationships with clients. Such clauses may also help deter a competitor from poaching employees.

In very limited circumstances, the courts have been willing to imply a right to put an employee on garden leave. However, these have been very specific to the facts of those cases and recruiters should not rely on implied rights. Recruiters should therefore consider including express garden leave clauses in appropriate employees’ contracts.

Enforcement
If an employee does not comply with a garden leave clause the method of enforcement is to apply to court for an injunction requiring them to comply, although the court could choose to award damages instead. Employers should therefore consider the following enforcement issues:

- The courts are only likely to uphold garden leave provisions if they are used to protect an employer’s ‘legitimate business interests’. Recruiters should therefore consider which employees it is appropriate to include garden leave clauses for, rather than simply introducing them for all employees.

- The courts may decide to enforce a garden leave clause only for part of an employee’s notice period if they consider that the full period is not
necessary for the protection of the employer.

- If an employee is on garden leave during their notice period the court may be less likely to enforce any post-termination
restrictive covenants.

Avoiding action
Ultimately, and particularly in the current economic climate, recruiters will want to avoid costly disputes over whether information in the possession of a former employee falls in to the category of confidential information protected by law.

Although just one of the legal tools available, garden leave clauses can be seen as the best — and most cost-efficient — method to prevent an employer’s confidential information being misappropriated by former employees and is certainly worth considering in the current economic climate.

Dan Fawcett is a solicitor and Christina Tolvas-Vincent is a partner at law firm Bond Pearce