Martin Malone outlines the key issues which need to be taken into account in this potentially tricky area.

The impact of the recession has led to some businesses making redundancies and others expanding their areas of work. It is increasingly common for businesses to approach team leaders, whether directly or indirectly and propose that he or she moves their team to their business. Naturally, this type of action is inherently risky for all concerned and employees who initiate a team move will often be acting in breach of contract. The employee initiating the move needs to be fully informed as to the actions that can be taken against his current employer in restraining the team from moving for a period of time thus scuppering the move completely.

The failure to take expert legal advice when contemplating a team move can undermine the process and leave the employees planning the move with large legal bills. If advice is taken at an early stage, a plan agreed and put into action, these pitfalls can be avoided.

At Canter Levin & Berg, we are highly experienced in the law likely to be encountered when instigating a team move. Our team are experts on employment law, injunctions, the effect of contractual terms and covenants, fiduciary duties and confidential information. Our senior lawyers will arrange to meet with you and advise you thoroughly on your contractual position, your obligations and restrictions during employment and your notice periods and how to navigate the legally tricky waters of a team move.

Areas of Law involved in Team Moves

---

Springboard Injunctions/Injunctions restraining Team Moves

An employer can now apply for a spring board injunction if it can demonstrate that there is a wide spread conspiracy poach employees from one company by another company or employee(s). The injunction sought usually restrains the employee or company accused of poaching from doing so and restraining the employees involved in the move by enforcing a period of garden leave and/or restrictive covenants in their contracts. Spring Board injunctions are complex and expensive to initiate and defend. Legal advice is essential.

---

Injunctions enforcing Restrictive Covenants

Many employees will have contractual terms restraining them from competing with their current employer, poaching clients and staff and setting up in competition. Such terms are only enforceable in certain circumstances and many covenants are badly drafted and not worth the paper that they are printed on. Many clauses are void as they restrain an employee's trade absolutely or attempt to protect a business interest that is incapable of being protected. It is essential to take legal advice as to the enforceability and effect of restrictive covenants as a breach of these terms can result in an injunction in the High Court and enormous cost and frustration. Injunctions enforcing restrictive covenants are the most common form of injunction sought in the High Court.

---

Injunctions enforcing Garden Leave

Senior employees often have garden leave (commonly known as "gardening leave") clauses in their contracts. Such clauses allow the employer to restrain the employee's employment during their period of notice whilst continuing to pay contractual entitlements such as wages, bonus and benefits. An employee may be expected to surrender his or her laptop or phone, undertake not to contact clients and remain at home during the period of notice. Such clauses are generally lawful, however, legal advice is needed when the employee intends to compete directly with his or her former employer after the period of notice has expired. Advice is especially needed if the employee intends to set up a company in competition with his or her current employer. In general, employers cannot enforce a period of garden leave without contractual entitlement, however, this varies from case to case. Garden leave is an area that has seen increasing litigation in recent years. Injunctions are commonly sought by employers to enforce a period of garden leave when an employee has resigned without notice and intends to compete with the employer.

Fiduciary Duties

---

Senior employees, especially directors, often have fiduciary duties which bind their behaviour whilst in employment. In particular, they must put the businesses interests ahead of their own in their actions. When contemplating leaving employment, an employee's fiduciary duties can often come into conflict with their future ambitions. If you are a fiduciary and leaving employment it is vital that you seek legal advice. Breach of a fiduciary duty is a serious matter and actionable in the High Court by the directors of the company.

Confidential Information

---

Employees are often in possession of information obtained or gleaned during their employment. When leaving employment, the employee must be sure that any information used in the future does not contravene legal obligations owed by the employee to his or her former employer. Employees engaged in technical roles will often be made to sign a contract that includes a specific clause in relation to confidential information. The clause will usually specify the information or trade secrets that the employer wishes to protect. Employees must take legal advice if they are planning on utilising information gleaned which comes into conflict with a contractual clause.

If no specific clause exists, the employee will still be bound by common law restrictions on the use of information if the information falls into categories 2 and 3 of the legal information classification system. The categories are as follows:-

• Class 1 Information - Information that the employer holds that is generally available to all workers and the general public. Such information is not capable of being protected.
• Class 2 Information - Information that the employer holds that is not generally available and is important for the running of the business. Such information may include client lists, pricing, sales strategies. Employees must treat information as confidential whilst in employment either because they are expressly told to via a contractual clause or in general. An employee may use this information after employment if it has been honestly acquired through experience and naturally through the performance of his or her role unless it is specifically protected by a restrictive covenant.
• Class 3 Information - Trade secrets that are extremely confidential. Employees must not disclose this information either when in employment or after leaving even if it has become acquired through the performance of the role.

It is common for an employer to seek an injunction against an employee who breaches covenant in respect of class 2 or 3 information or uses trade secrets without their being a contractual restraint in place.