Having an employee breach a term of an employment agreement is stressful for any employer to deal with and can have significant ramifications for your business. Usually, when you have grounds to make a legal claim against your employee you will need to act quickly. Why? This is because these claims often involve former employees poaching clients and using confidential information. The impact of these types of breaches can be detrimental to a business and need to be stopped without delay.
There are several different claims you can bring against employees depending on what they have done and what their employment contracts say. Here’s what you need to know if you are considering claiming against an employee (former / current).
Types of Claims
Breach of duty of confidence
All employers and employees in the UK have a term implied into the employment agreements between them that there is a duty of confidence owed between them. The fact that this is an implied term means that it applies whether or not it is expressly written in the agreement itself.
The purposes of this implied duty is that when employees leave their employment, they cannot disclose or use information which is equivalent to a trade secret belonging to their now previous employer.
For a claim to be successful you will need to show that the information being used or disclosed is and/or would harm your business. It’s important to get legal advice on whether the information is protected by the duty of confidence. If the employment agreement contains further protections for confidential information, these will also be relevant to your claim.
Breach of restraint of trade clause
If there is a restraint of trade clause in the employment agreement and the employee breaks its terms, you can pursue a claim against them for losses caused to your business as a result. These claims usually involve an employee going to work for a competitor or setting up a business in competition with yours. The clause will need to be valid for it to be enforceable. The courts take a strict view on such clauses and impose an obligation on employers to be reasonable when imposing restraint of trade clauses. This is because they can have the effect of imposing onerous obligations on the previous employee which could impact their livelihood post-employment.
Therefore, ensuring that your employment contracts are drafted fairly whilst safeguarding your business at the same time is imperative. The wording is key.
Fraud / theft / misconduct
If your employee does something which you believe is misconduct, for example, steals from the business, uses physical violence, makes racist remarks, is discriminatory towards colleagues or commits fraud, you can use your disciplinary procedures to ensure that employee is reprimanded appropriately. The employment contract may even provide a definition of the kinds of behaviour that constitute misconduct or disciplinary matters.
The key here is to ensure that you follow the disciplinary procedure applicable carefully and fairly to deal with that employee. If you do not have a disciplinary procedure in place, Saracens can assist. Just give us a call.
Remedies for Breaches by Employees During Employment
The rules and procedures you have in place for taking disciplinary action are important here.
Ideally, its recommended that your procedures follow the ACAS Code of Practice on Disciplinary and Grievance Procedures as this is considered best practice. These should be included in your staff handbook or the statement of employment, so that employees know the rules.
The code sets out what behaviours will constitute misconduct and the actions that can be taken in respect of each.
It’s important to follow the procedures you have set out. There is less chance of getting these wrong if they follow the ACAS Code of Practice. There is no set process for disciplinary hearings, but usually:
- you would need to give the employee written notice of the disciplinary hearing, at which you need to give them a chance to be heard
- then inform the employee in writing about your decision and the action you will take, for example a written warning, final warning or dismissal
- the employee must be given the opportunity to appeal – the appeal procedures need to be written into their statement of terms and conditions of employment.
- it’s also important to undertake a proper investigation and not judge a situation until you have heard the employee’s explanation.
Remedies for Breaches by Employees Post-Employment
A contractual undertaking can be used if an employee has breached his or her employment agreement and it is feared that confidential information will be released or the employee will take some prohibited action. You can have the employee sign a contractual undertaking which reflects the issue at hand – e.g. not to release confidential information or not to do the prohibited activity.
Sometimes this is enough to stop them in their tracks. However, a contractual undertaking only has the same force as the original employment contract. So, if the employee does not stop breaching his or her contract you will need to obtain a court order to prohibit them.
Undertakings to the Court
If you begin court proceedings for the purposes of obtaining an injunction against the former employee and it turns out the employee does not want to contest it, the employee can give an undertaking to the court. This means that the former employee will give a promise to the court that they will refrain from conducting the breaching activities. If they breach the undertaking and carry out or continue the prohibited action, they will be in contempt of court. They will also be liable to you in respect of the same.
An injunction is a court order which prevents the employee from doing something, or makes them do something. If the employee does the action which is prevented by the injunction, or fails to conduct themselves in the manner ordered, that employee can be found to be in contempt of court. This of course incurs criminal liability.
Injunctions can be used to prevent actions by former employees that might harm your business, such as taking or releasing confidential information or setting up a business in competition. The court can issue an interim injunction (which is effective immediately) and a substantive hearing will follow where both sides are heard in full. There are three main types of injunction for post-employment situations:
- Springboard injunctions – these are used when there is a concerted plan to poach your employees. The injunction will use restraint of trade clauses or enforce garden leave clauses in the employees’ contracts to prevent them working for the competitor. However, after the time limit on the restraint of trade clause expires, the employee can still go to the competitor.
- Garden leave injunctions – these are used to restrain employees from finding employment with competitors or setting up a business in competition during a period of garden leave. Garden leave is when the employee is not working but is still being paid. This is only possible for employees who have a clause for garden leave in their contract.
- Restraint of trade injunctions – these injunctions are used to enforce clauses which prevent the employee taking customers and setting up a competing business. The clause in the employment contract will need to have been well drafted to be enforceable.
There are many different factors the court will take into account when deciding whether to grant an injunction. The individual circumstances of your claim will be taken into account including how much damage will be done by the employee’s actions, the strength of your claim, the financial circumstances of your business and the employee, as well as the conduct of the parties.
If you are unsure of the type of injunction you require for your business, our advisors will be able to assist.
The court can order an employee to pay damages instead of or as well as issuing an injunction against them.
Damages are intended to compensate for the losses you incur. So if an employee has already done what you are afraid he or she would do, there will be no point getting an injunction and damages will be the appropriate remedy. Damages are also more likely if the loss you have suffered is quantifiable.
Time Limits for Bringing Claims and Eligibility Requirements
There is a time limit of six years for civil claims against employees (for breach of contract), but the court has a discretion to extend this time in particular circumstances.
There are no eligibility requirements as such for bringing a claim. The main risks are having the claim thrown out of court because the employee is not restricted in the manner you feel is damaging your business or if the clauses you are seeking to rely on have been drafted onerously / you are seeking to rely on an invalid clause.
Saracens can advise you as to the viability of your claim and whether it’s worth pursuing.
Is the Claim Worth the Costs of Replacing the Employee or Remedying their Breaches?
The costs of bringing a claim / seeking an injunction are high and a calculation needs to be completed to determine if the loss you will incur from the breach of confidence, breach of restraint of trade clause or whatever the breach may be, is sufficient to justify the costs of taking the matter to court.
The financial circumstances of the employee are also important here – if an injunction is ordered in your favour, the employee may not be able to pay your legal costs, or they might be unable to pay an award of damages ordered.
At Saracens, our specialists can conduct a cost-benefit analysis for you before you take any substantive action against a potentially breaching employee.
Importance of Record Keeping
If you end up at an Employment Tribunal or Court, the actions you have carried out and all of the documentation you have made regarding the matter will be laid bare. If you can show that you have kept records of everything relevant to the dispute and taken all of the correct steps, this will reflect favourably on you. It shows that you care about following due process, that you have nothing to hide and your focus is about getting it right.
If you would like assistance in making a claim against an employee, please contact our office on 020 3588 3500 to speak to one of our employment solicitors.
Do you have any thoughts on this piece? We would love to hear your comments, so please feel free to comment below.
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