Business Protection

It is inevitable that during the course of their employment, employees will have access to business and commercial information regarding their employer's business.  It is important for employers to have safeguards in place to protect their business, particularly in relation to:

  • confidential information;
  • restrictive covenants; and
  • intellectual property rights.

Confidential information

Employees are subject to certain obligations regarding confidentiality both during and post employment.  During their employment, there is an implied duty imposed upon employees not to disclose their employer's confidential information.  This duty is of potentially wide application and will depend on the nature of the information in question.  After the termination of employment, the implied duty imposed on employees not to disclose confidential information is limited to information which amounts to a trade secret. 

Employers can protect their business interests better by including express provisions in the employment contract restricting the employee's right to use or disclose the employer's confidential information after the employment relationship has ended. 

Restrictive covenants

An employer can make use of contractual terms to restrict an employee's ability to harm the business after the termination of the employee's contract (for example by working for a competitor or soliciting customers).

Generally, a contractual restraint on a former employee's freedom to work are void and unenforceable as being in restraint of trade and contrary to public policy unless they can be shown to be no wider than reasonably necessary to protect the employer's legitimate business interests. In determining whether or not a particular covenant is reasonable, the courts will, among other things, look at the length and scope of the restriction.

Legitimate business interests can be trade secrets, trade connections or the stability of the employer's work-force. The types of restrictive covenants used to protect legitimate business interests are broadly:

  • non-competition restrictions, which prohibit the former employee from working in a competing business;
  • non-solicitation covenants, which prohibit the former employee from soliciting specified business connections; and
  • non-dealing covenants, which prohibit the former employee from dealing with customers or other business connections of the employer.

An employer who has acted in breach of contract will not be able to enforce a restrictive covenant against an employee.

Intellectual property

As a general rule, an employer will own the copyright, patent, unregistered designs and registered designs in works created by its employees in the course of their employment. "In the course of employment" refers to the scope of the employee's duties, and not the period of employment.

Intellectual property rights created by consultants will vest in those individuals rather than in the recipient of their services.  It is therefore advisable to include a specific assignment of intellectual property rights in consultancy agreements.

 


Employment