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Inside Disputes

What's yours is yours
Inside Disputes

Inside Disputes

Author
Hugo Plowman
Date
11 May 2015

Successful businesses employ successful people. If your business is adept at recruiting and developing the best people, it is well-placed to distinguish itself from the competition and maximise opportunities for creating growth and revenue...


What's yours is yours

Successful businesses employ successful people. If your business is adept at recruiting and developing the best people, it is well-placed to distinguish itself from the competition and maximise opportunities for creating growth and revenue.

However, as well as bringing with them skills, knowledge and relationships that help generate value, the people within a business may also present its greatest threat. One day, those people may leave to launch their own businesses, incentivised by profits and willing to take the risks associated with a start-up, or because they are head-hunted by an established competitor promising an improved package and a more exciting career path in return for immediate economic advantage gained through the currency of the individual's competitive knowledge and relationships. Consequently, the business suffers the obvious loss of that individual's performance in the workplace and his or her personal relationships with clients, as well as potentially knocking the morale and productivity of the remaining staff.

Real problems emerge when the employee decides to pocket the organisation's trade secrets before they go. Confidential information that is integral and valuable to the success of the business can cause devastating harm in the wrong hands. Restricting use of this information by employees after termination of employment is crucial to properly protecting the business from unfair competition. This issue cannot be ignored. Unfair competition devalues the business and jeopardises future revenue streams. It harms businesses' reputations and staff morale, and can lead to the loss of key employees and clients.

If you are a victim, it is vital to tackle this problem at soon as possible. There are various options available to you through the court process: when the rights of your company have been violated and the wrong cannot be effectively remedied by an award of money damages, the courts have the ability to grant powerful injunctions against employees who steal data or breach post-termination of employment restrictive covenants. However, prevention is better than cure, and the best practice is to consider upfront the investment you make in assessing and managing the risk posed by departing employees. Here are our top six actions you can take to better protect your business:

1. Identify and define your IP and confidential information in contracts: Take the time to consider what intellectual property and confidential information you have and where it is. Once you have identified this, define it and protect it. Make sure it's expressly dealt with in your contracts with staff and third parties.

2. Appoint a director at board level who is responsible for data protection and cyber security: It is no longer good enough to leave this issue to your in-house IT function. Governance structures, staff culture and training in these issues are vital.

3. Put in place the right database, social media and mobile working policies: Prevention also lies in your policies. For example, an email and internet use policy can give you the right to monitor employees' activity online and their emails, whilst a good social media policy should help you maintain control over business information stored by employees on sites such as LinkedIn.

4. Invest in IT security, password protect and encrypt systems: As the business world becomes more global and with advances in technology, there is an ever increasing online threat to business data. Basic, low-cost steps can be taken now to improve your IT security systems and mitigate data breach.

5. 'MOT test' your restrictive covenants once a year: Once you've done the hard work, it's easy to file away and forget about your contracts. However, the law develops. A covenant today may not be suitable for tomorrow's new recruit. Set a calendar reminder every year to check that your contracts remain enforceable.

6. Take out a cyber-insurance policy: Cyber liability insurance cover has been available in the market for years, although many organisations are just coming round to the idea that this is a 'must have' not just a 'nice to have'. Speak to your broker today about what level of cover you need. 

For more information please contact:

Hugo Plowman
Partner, Fraud