Out the door, not off the hook: Four steps to protect your business when a key employee resigns
When a key employee resigns, particularly to join a competitor, businesses can find themselves facing an immediate question: what can we do to protect ourselves?
From valuable client relationships to commercially sensitive business plans, departing employees can potentially take significant confidential information and trade secrets with them. Acting quickly and understanding the protections already available to your business can make often be the difference between retaining or losing the things your business has worked so hard to build.
Here are four key steps for businesses to consider following the resignation of a key employee.
The employment contract should be the first place you look.
Check what post-termination restrictions are in place and consider whether they are likely to be enforceable. Restrictions will only be valid and enforceable where they go no further than necessary to protect the legitimate business interests of the company seeking to enforce them.
This means considering the scope of the restrictions carefully rather than simply assuming that, because a restriction appears in a contract, it can automatically be relied upon.
Understanding the contractual position at an early stage can help you identify the protections available to the business and inform your next steps.
If concerns arise around an employee's departure, it is important to establish the facts.
Company devices and email accounts may hold relevant evidence, whilst there may also be circumstances in which forensic IT experts can assist with an investigation.
It is important not to overlook potential warning signs. Establishing what has happened will put the business in a better position to determine an appropriate response.
Garden leave may be a useful tool where a key employee resigns, but there are several important points to consider before using it.
Establish whether the employment contract gives the business the right to place the employee on garden leave. You should then consider whether garden leave is appropriate for the whole or only part of the employee's notice period, as well as its potential impact on any post-termination restrictions.
The appropriate approach will depend on the circumstances and the contractual protections available to the business.
When a departing employee poses a potential risk to the business, early action is important.
Taking legal advice at an early stage can help you understand your contractual position and determine the appropriate response before the situation develops further.
Ultimately, prevention and preparation are preferable to dealing with an issue once it has escalated.
Preparation is key
The resignation of a key employee does not necessarily need to become a major issue for the business.
Having appropriate contractual protections in place, understanding the restrictions you can rely upon and knowing how to respond when concerns arise can leave your business in a much stronger position.
When a key employee resigns, remember the four key considerations: review the contract, gather evidence where appropriate, consider garden leave and seek legal advice early.
How Freeths can help
If a key employee has resigned and you are concerned about the potential impact on your business, or you would like to review the protections currently in place within your employment contracts, our team can help you understand your options and the steps available to protect your business.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
Related expertise
Contact us today
Whatever your legal needs, our wide ranging expertise is here to support you and your business, so let’s start your legal journey today and get you in touch with the right lawyer to get you started.
Get in touch
For general enquiries, please complete this form and we will direct your message to the most appropriate person.