I don’t usually allude to boy bands and broken teenage hearts in employment law, but the recent events surrounding Zayn Malik’s departure from One Direction and the subsequent leak of his mystery ‘solo single’ have got me thinking about restrictive clauses.
Firstly, it was widely reported that Mr. Malik’s main intention for leaving One Direction was to live the life of a normal 22-year-old, which might have raised some questions among his fans and ex-band mates if the leaked track turned out to be genuine. But more importantly, his actions could have potentially harmed the identity and integrity of One Direction as a brand.
When an employee moves on from a company and continues to work in the industry, the same risk applies. There are a number of considerations a business can make in order to protect their commercial interests from competing ex-employees – but how far can you go to ensure these are effective?
Imposing restrictive clauses in employment contracts
The most common way of preventing ex-employees from poaching clients is by imposing post-termination restrictive clauses within contracts at the start of employment. These prohibit ex-employees from directly competing against the interests of the company after he or she leaves. There are several variations in restrictive clauses, but employers must first consider a number of factors in order to make sure they are legitimately enforceable.
Factors to consider when imposing an enforceable restrictive clause:
- What position does the employee hold within the company? Restrictive clauses are particularly relevant for highly skilled staff or senior roles, but they may not be necessary for very junior employees. Think realistically about the competitive risk of that particular person, and whether it’s actually worth putting post-termination restrictions on them.
- What exactly is being restricted? Preventing ex-employees from stealing clients is one thing, but putting contractual limitations on them working with any of your business contacts, including suppliers, might be unrealistic. Unless you can justify legitimate business interests, the clause may not stand up in court.
- Length of restriction Three to six months is the usual length of time to impose post-termination restrictions, although 12 months may be appropriate for senior employees with extensive knowledge of the business and sensitive information. Any longer than this period may be considered legally unreasonable, and could deem your clause unenforceable.
What about social media?
A notorious legal grey area, social media presents a whole new set of considerations for business owners to make when it comes to protecting commercial interests.
Employees, particularly those with client-facing roles, may make numerous valuable contacts through LinkedIn during their time with your company, and this might leave you feeling vulnerable to their actions with these contacts after they leave. The tricky thing is, LinkedIn is of course an independent platform, and the ownership of personal profiles is debatable.
So how do you prevent your ex-employees from using all those contacts to steal clients and competition from your company? Demanding a handover, or suggesting your ex-employee should delete their profile could be fruitless. However, including a clear social media policy in contracts at the start of employment, and ensuring it relates to all contacts made during employment, could help you retain some peace of mind.
If you want to protect your commercial interests from competitive ex-employees, you need to make sure your contractual agreements are watertight from the start. Post-termination restrictive clauses and are good way of limiting the movement of sensitive information and contacts, but in order to be enforceable your policies must be clear, fair, and relevant to legitimate business interests only.
It’s hard to say whether Zayn Malik’s contract was subject to any restrictive clauses, but rumours of his so-called solo track have since significantly changed direction, so to speak.
Hugh Hitchcock
Hugh Hitchcock is a director at DJM Solicitors, a commercial law firm providing legal services to clients across the UK and Los Angeles, Hong Kong and Japan. His career spans 23 years spent in media and corporate law, and he specialises in dispute resolution. He previously spent six years at a leading media firm that acted for Elton John and The Beatles' record label Apple.
