The trend of employees setting up in competition with their bosses is on the increase according to Jonathan Mortimer, Head of Dispute Resolution at Raworths in Harrogate. “Employees becoming dissatisfied with their jobs and setting up in competition with their employers is definitely on the up, resulting with the Courts being inundated with claims to stop unlawful competition,” says Jonathan Mortimer.
He says: “Recently we have seen a very considerable increase in cases involving what is the trade-off between an employer being able to protect his business from competition and the right of every employee to choose how they work and how they can exploit their own experience”.
Mr Mortimer says that the economy is a factor and that when there is little growth employees become dissatisfied with their lot. He says: “With incomes not as high and bosses not retiring so early to make room for younger employees there is no longer the same degree of loyalty as there has been in good times. As a result, employees say to themselves: “I know how to do the job just as well as my boss” or “I can do better on my own and make more money”. This frustration frequently translates into resentment and ideas of setting up in competition against the former employer.”
Many employers find to their complete horror that employees have been plotting to set up in competition for many months, frequently during working hours, and suddenly resign in numbers at the same time, having taken confidential information relating to the business to help them and even orchestrated customers to move to the new competitor on day one.
Mr Mortimer says there is a common perception wrongly held by both employees and employers that there is little that can be done to prevent employees setting up in competition and that restrictive covenants contained within employment contracts preventing competition are not worth the paper they are written on.
In fact, the law is very robust:
“There has been a real shift in the law in recent years that offers greater protection to employers than ever before. In particular, there is now clarity on the enforceability of restrictive covenants, what amounts to misuse of confidential information of an employer but, most importantly of all, the use of the new springboard injunction. This is where the Court restrains the former employee from taking any further steps to compete with his employer post-employment for a period of time equal to the time it should have taken the employee to set up his competing business fairly in his own time,” he says.
As a result, he argues that employers should, in most cases, be able to prevent unfair competition from former employees and that departing staff need to be very careful as to how they go about their new enterprise, otherwise they could be on the receiving end of an injunction granted by the Court.
Mr Mortimer says that quantity of contested cases between employees and employers has been the highest he has seen in 20 years of practice as people scramble to make a living.
He says that the key is for an employer to protect his business from employees setting up in competition is to look for the warning signs and then take action:
“The most common indicators of trouble ahead is an inability to meet employee expectations, a change in attitude by a customer who may already have been approached by a soon-to-be-departing employee, unexplained drops in sales or work levels and ordinarily some clue can be found on the employee’s computer of their forward planning.”
For further information please contact Jonathan Mortimer on 01423 566666.