RIGHTS AND OBLIGATIONS AFTER TERMINATION OF EMPLOYMENT: CURRENT ISSUES
“Breaking up is hard to do”. This can apply to all relationships, including the employment relationship. We commonly see disputes arise about “who gets what” when the employment relationship ends. Below are some recent issues our clients have faced after termination of employment. We find these can affect anyone from small to large businesses and CEO’s through to young employees just starting their careers.
Return of company property & factory re-sets of company equipment
We are frequently seeing issues with employees doing a factory re-set of their company phone or laptop when they leave. This is usually to remove their personal information from company equipment or because their personal Apple ID or google password is stored on the device. But the factory re-set wipes company information that belongs to their employer.
As with all company property, equipment and information must be returned to the employer when the employment ends.
Restraint of trade clauses: non solicitation and non competition
There is a common misconception that restraint of trade clauses are not enforceable and “not worth the paper they are written on”. This is not always the case. The Employment Relations Authority or Employment Court will commonly enforce a non solicitation clause or non compete clause if it is “reasonable”. Issues commonly arise over whether a restraint is reasonable and enforceable and whether it has been breached. Like many disputes, these issues can usually be resolved through negotiation. But sometimes court proceedings, and even an injunction or an award of damages, can result.
Taking or using confidential information – Employment Court search orders
When employment ends, most rights and obligations end. Confidentiality is an exception. The obligation of confidentiality survives termination of employment. It applies indefinitely.
Sometimes a long term employee will have company clients or customers they have very close relationships with and have provided services to for a very long time. They may become friends with customers outside work. They might come to see them as “their” customers. But the customer relationship usually belongs to the employer, not the employee. That means confidential information about the customers cannot be taken with the employee when they leave.
We recently assisted a client to obtain urgent without notice orders from the Employment Court, allowing search of premises of an ex employee’s new employer. The premises were searched in the presence of an independent solicitor and an IT consultant. Photos were taken and electronic information was cloned. Our client alleged the ex employee had taken company product, customers lists, pricing information and customer testing schedules. The new business was alleged to have aided and abetted the ex employee. They had set up a competing business and the ex employer had lost clients to the new business.
Breach of the duty of loyalty and fidelity
In the situation referred to above, the employer alleged the ex employee had begun setting up the competing business and solicited clients before their employment ended. During employment, employees have more extensive obligations than after employment. This includes a duty of loyalty and fidelity and to devote all their paid hours of work to their employment. Sometimes a senior executive might have even higher obligations, including fiduciary obligations. We commonly provide advice to senior executives considering setting up a competing business, before they take any steps to do so.
Breach of records of settlement: non disparagement clauses
It can be easy to forget about ongoing obligations once the employment is over, even when a record of settlement has been agreed. Records of settlement will often introduce an extra post termination obligation on both parties not to disparage the other. We recently brought successful Employment Relations Authority proceedings on behalf of a CEO whose previous employer had disparaged her in breach of agreed terms of settlement. The CEO was also able to successfully defend allegations that she had breached her obligations to her employer.
What to do about post termination issues?
As with most relationships, good communication is key and “prevention is the best cure”. Employers and employees should discuss issues at an early stage, either during the notice period, or soon after the employment ends. Parties can be reminded of their rights and obligations and return of company property can be checked at an exit interview, for example. But if issues do arise, or if you are uncertain of your rights or obligations, you can contact our Employment Law Department for advice. Early assistance can prevent issues from escalating.
