On entrenched employees, exasperated employers, and restricting re-employment: part 2.

If you're an employer who's concerned about employees spilling corporate secrets to your competitors after they leave:

This post is for you.

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With the recent spotlight on non-compete clauses (a.k.a. restrictive covenants), employers may be considering whether, and how, to use such clauses.

I set out below some scenarios.

1) Some employers say, "well, such clauses sound like a good idea! I'll include, in my employment agreements, a clause that provides that after employees leave, they cannot join any company operating out of Earth, the moon, and Mars, which engages in any business that we've ever vaguely considered going into, for the remainder of their corporeal lifetimes. After all, if it's in the contract in black and white, it's enforceable, right?"

...I don't suggest this approach.

Much ink has been spilled on how such clauses may be unenforceable - no need for me to repeat here.¹

And if a clause is unenforceable, what's the point in taking the time and energy to include it in your contracts?²

2) Some employers say, "well, it seems like such clauses may not be enforceable. Nevermind! We'll just work in a wide-ranging clause. If we can enforce it later on, good. If we can't enforce it, so be it."

...I don't suggest this approach.

If you don't know, at the point when the employee joins you, whether the clause is enforceable, then you're just kicking the issue down the road, and will have to deal with it one day when the employee is fired, resigns, or retires.

3) Some employers say, "well, I know the clause may not be enforceable. But it doesn't matter. My employees are not very sophisticated and won't seek legal advice. Enough of them will just take the clause at face value. And for those who breach the clause, it's probably few enough of them that it won't matter."

...I don't suggest this approach.

As I suggested in part 1,³ it's a lot easier these days for employees to obtain legal advice, and to realise that the emperor has no clothes. And all it takes is for one employee to obtain legal advice, and to spread the word among their colleagues, for this strategy to fail.

4) Some employers say, "well, I know the clause may not be enforceable. But I will sue the pants off any employee who breaches the clause. They don't have the resources to defend such a lawsuit and will have to fold. And that will serve as a lesson to the other employees!"

...I don't suggest this approach.

Because if the employer does sue:
a) they may well be subject to the court of public opinion;
b) they may underestimate the employee's tenacity and resources; and
c) if they lose the lawsuit, they may well be out of pocket by a 6-digit sum.

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So what should employers do to protect themselves from ex-employees giving the competition an unfair leg-up?

I'll discuss that in part 3.