The pandemic has continued to leave major shifts in our economy and the way that people associate themselves with work.
According to MicroBizMag, in the year 2019/2020, over 600 thousand start-ups were founded, which equates to almost 2,000 a day. This will almost certainly increase by the end of this year, due to many being made redundant from their jobs because of the issues brought by COVID.
So, what does this mean for current employers? With so many new start-up businesses, there is a concern that previous employees are competing directly with their former employers.
What does it mean to be in competition?
Setting up in competition can be the act of an employee, that is still employed, planning to set up a new business that runs in competition. It can also be the case of an employee (or group of employees) who either leave of their own accord or are made redundant, running their own business in competition.
These individuals could potentially take away current clients from their old employer and will have had access to prices and other confidential information that can be used in competition also.
Breach of contract
If an employee is suspected of, or is caught in the act of trying to set up a new business in competition, they may be in breach of their contract. If they are not already an ex-employee, they will likely be dismissed and could face criminal charges.
It is worth making sure your business has the correct policies set up to ensure this is covered.
On the other hand, if an employee is found to not have used any confidential information and has simply used their experience in planning to set up a business, this may not breach the contract.
Enforcing Restrictive Covenants and Non-Competition Clauses
As an employer, there are several ways you can mitigate an employee(s) setting up in competition. The first and probably most important one is setting up restrictive covenants.
What is a restrictive covenant?
Also known as post-termination obligations, restrictive covenants are within the employees contract that stipulate that they cannot do certain things once their employment is terminated. The employee must have signed this as part of their contract and can be made to be as specific as necessary to cover your business’ needs. However, these restrictions will have a time limit so after a reasonable period, it may no longer be enforced.
These covenants will include items such as; setting up in competition, poaching clients and colleagues and using confidential information.
If an employee’s seniority changes, or their position within the business, the employer must make sure the covenants still apply and where necessary, change to reflect the new position.
How can SFB help?
With SFB’s experts in HR and legal matters, we are available to assist you, as an employer, if you have an employee or group of employees, you suspect may be setting up in competition.
We are on hand to support and advise on the next steps in ensuring your business remains safe and confidentiality is kept at all times.
Just call us on 01279 874 676 or email info@sfb-consulting.com