CATERPILLARS CRAWLING OVER EMPLOYEE CONFIDENTIALITY CLAUSES

A 2012 court case heard in the Court of Appeal Caterpillar Logistics Services (UK) Ltd v Huesca de Crean dealt with an appeal relating to whether an organisation could prevent a former employee working for a competitor.

A restrictive covenant clause which can at least mitigate any damage to your business when a key employee leaves. For example, you may be able to restrict the employee using confidential information about your business to a competitor’s advantage or may even be able to stop them working for certain competitors within an agreed locality.

This case revolved around a former employee working for a competitor. Their contract of employment had a confidentiality clause (so they could not disclose business sectets but, crucially, the employee did not have a restrictive covenant in their employment contract. The employer wanted to

(i)                 stop the former employee working for a competitor and

(ii)               stop the former employee using confidential information which may harm the employer’s business

The Court decided that the

(i)                 former employer could not stop the former employee working for a competitor and

(ii)             because of the lack of any real risk of harm to the employer, they could NOT be stopped working for the competitor.

So, if you want a former employee NOT to be able to work for a competitor you must think about having a restrictive trading clause in your employment contract. You can never create an absolute bar for former employees (for example, you can’t stop them working for any competitor within the UK ever again) but you can include some measure which can restrict a former employee and so provide your business with some protection.

It’s become somewhat of an urban myth that restrictive trading clauses are not worth the paper they are written on, a well constructed clause can save you thousands of pounds. For help with this and other employment law matters phone us on 01244 300413