Clear Demarcation Can Avert Clause Breach Risk

Jonathan Kitchin, associate and dispute resolution specialist, looks at the tactics businesses might employ in the 'Recruitment Line of Battle'.

The "line of battle" was a tactic used by ships during naval warfare, whereby the fleet would form a line from end to end so each ship could fire in the same direction without risk of hitting a friendly ship. Businesses will no doubt also be considering the risks to their revenue streams and what tactics to employ to protect their commercial relationships, especially when key people depart.

Customers are of course free to seek advice or purchase products from whomever they choose. Practically, allowing customers to depart with a leaver is often closely connected with who introduced the customer and who holds the relationship. However, many leavers will have signed up to restrictive covenants that prevent them from working in competition and poaching customers (or staff) post departure. Those clauses are only legally enforceable if they protect a legitimate business interest and are necessary and proportionate in scope. Time spent considering such covenants for key staff can save a huge amount of time, stress and money later on. 

Employees also owe strict duties of confidentiality and fidelity whilst employed. For example, they cannot siphon off information whilst employed in order to set up in competition. Most contracts of employment will include express provisions defining "Confidential Information" as including hard copy or electronic customer files and sensitive business information, which has to be delivered up or permanently deleted before departure. 

For those taking on new teams, it is important to be aware that a potential liability exists for deliberately inducing new recruits to breach their duties and covenants with their old employer. This is why most employers get notified of a new recruit's existing obligations and may also need advice. 

Linked to the issue of confidentiality is that of data protection. The basic principle of the Data Protection Act 1998 is that personal information cannot be used (or "processed") without a licence (or "notification"). Consequently, if a leaver wishes to retain customer information in their personal capacity (and not under the umbrella of their new employer) they must have their own data protection notification. It is also important to establish whether customer consent has been given for personal data to be held by the leaver or their new employer for a different purpose. Taking the entirety of a customer database may not only amount to breach of confidentiality and of restrictive covenants, but could also be a criminal offence under the Act. 

Finally, when providing a reference, exercise care and skill as to factual content, opinions and verifying the information upon which they are based. If comments are incorrect and could damage a professional reputation this may bring about a threatened claim for defamation. Exercising caution will help mitigate the risk of a dispute becoming personal, which makes it more difficult (and expensive) to resolve. 

Disputes relating to job moves can get litigious very quickly because they invoke emotions of loyalty and betrayal. More importantly, it brings into play the use of an injunction to restrain conduct or a departing employee may chance their arm at an employment tribunal for negotiating leverage. Having an overview of what is likely to crop up from the outset allows for a systematic attack on what is important and the use of tactics which fend off unwelcome distractions. 

For more information Jonathan can be contacted on 01392 685246 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it