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Predatory Workplaces - Damage control when key staff leave |
How can you retain key staff or delay competitors from poaching them? |
A properly crafted contract of employment is the first ingredient of any effective employment relationship, and it should include a clear understanding of what each party is owed if the relationship sours. |
In drafting any restraint-of trade clause, it is crucial that employers be reasonable in the restraints they seek. |
In a recent case, a company tried to restrain a key employee who had begun looking for alternative employment and had signed a letter of intent to be a non-equity partner in a competing consulting company. |
His employer sought to stop him from performing information management services for any of its own clients for 12 months from the date of termination. |
The general rule is that such restraints are against public policy and void. To be enforced, the company would have had to demonstrate that the restraints were no more than were necessary for the protection of its legitimate interests. A judge described them as "extraordinarily broad" and found them to be unreasonable. |
The company went on to make the employee go on 'garden leave', that is, to stay away from work for the notice period while continuing to be paid. The thinking behind garden leave seems to be that it may be better to pay an employee's full salary than see them work for a competitor. |
However, in this case the employee said he intended to begin work for the other company the following month. |
The court found that even on garden leave, the employee would be 'working', in the sense of doing as directed by his employer. His remuneration was not affected as his performance bonuses were not commission based. And he was not considered to be in the sort of position where his future employment would be undermined by an enforced break from the marketplace. |
The employer was not found to be required to provide him with work, and putting him on garden leave would not repudiate the contract. However, the court did not restrain the employee from working for the firm's competitors during the notice period so the directive may have had little effect. |
