'Post-Employment Obligations Every Employee Needs to Know' By Rowan ONeill, LegalVision
Employees can have legal obligations even once their employment contract has ended. The employment contract that you sign at the start of employment includes some obligations, and others exist at law. The primary post-employment legal obligations to be aware of are:
- restraint of trade; and
- intellectual property.
This article will explore these post-employment obligations and what employees need to be aware of.
As employees, through doing your job, you gain access to your employer’s confidential information. Often your employment contract will include a clause restricting you from disclosing confidential information obtained during employment. This also applies at law, so if your employment contract does not include a confidentiality clause, you are still required not to disclose confidential information both during and post-employment. As such, some employers also include in employment contracts clauses on the return of or destroying confidential information upon employment termination. Confidential Information may be defined in your employment contract and often includes information such as business and marketing plans and strategies, company manuals, procedures, employee lists, financial information, lists of supplies and clients.
During employment, Tim had access to his employer’s product price lists (which were not available to the public). He has since left the employer and is starting up his own business with a business partner. They have been using the price lists to set prices for their own products. This would likely amount to a breach of the post-employment obligation on Tim not to disclose confidential information to his business partner or to use confidential information for purposes other than what his employment required.
Restraint of Trade
Some employment contracts may include a restraint of trade clause. This is designed to prevent or deter employees both during and for a period after employment from:
- working for a competitor or starting a competing business (non-competition); and
- soliciting clients, employees, contractors or suppliers (non-solicitation).
When it comes to the enforceability of restraint of trade clauses, the onus is on the employer to persuade the court the clause is reasonable and therefore enforceable. Therefore, to determine enforceability, the court will consider:
- whether the employer has a legitimate business interest to protect; and
- Whether the restraint is a reasonable protection of that interest.
In determining whether a restraint is reasonable, the court will consider:
- the negotiation process, and in particular, any comments made when negotiating the restraint clause;
- the bargaining position of the parties;
- the nature of the employer’s business and characteristics of the employee;
- whether any consideration (i.e. additional payment) was given for the restraint; and
- the duration of the restraint and geographical area.
Clauses on non-solicitation of clients may be seen by the courts as enforceable if it is seeking to protect the employer’s legitimate business interest in a manner that is reasonable. Furthermore, the court would also consider the length of the restraint period and whether that would be seen as a reasonable protection of the interest.
Jane has left employment and two months later has gone to work for a competing business. Her previous employment contract stated that she could not work for any competitors for six months. However, the question here is whether this restraint clause would be reasonable to protect her previous employer’s business, particularly if Jane cannot find other work with businesses that do not compete with her previous employer.
Jim has started working for a new employer immediately after leaving his previous employer and has been contacting clients of his from his previous employer. His previous employment contract contained a clause preventing him from poaching clients for six months post-employment. Depending on the way this clause is drafted, this restraint clause is likely to be more enforceable considering it is protecting the client connections of the employer, which has been considered to be a legitimate business interest and not necessarily restricting Jim from participating in the market.
Often employment contracts will include an intellectual property clause. This will state that the employer owns all intellectual property rights, including any material the employee creates or develops during employment. Therefore, if post-employment, you still have IP from your previous employer which you have not returned or which you are using, your employer may request you return it.
Mary is an IT developer, and her employment has terminated. Her employment contract includes a provision that her employer owns all IP she developed during her employment. The agreement states that she should return the IP to the employer upon termination of the agreement. As such, Mary still has some code she developed during employment on her computer. She should return this code to her employer.
What Happens if You Breach These Obligations?
You may receive a letter from your previous employer prior to breaching any post-employment legal obligations. Therefore, the letter’s intention may be to remind you of your post-employment obligations. You could also receive a letter outlining if you have breached something in your employment agreement. As such, your employer may request you to sign an undertaking that you agree to comply with your post-employment obligations. If you have breached any of your post-employment obligations, the court may restrain you through an injunction that requires you to stop doing something.
Jennifer has resigned from employment and has started up her own business in the same industry as her previous employer. She has been using the supplier lists that she had kept from her previous employer and contacted the suppliers. However, her previous employment agreement contained a clause on confidentiality and non-solicitation of suppliers. Following this, her previous employer speaks to their suppliers and becomes aware that Jennifer is in contact with them. Therefore, her previous employer has sent Jennifer a letter reminding her of her post-employment legal obligations and asking her to sign an undertaking to agree to the post-employment obligations.
As an employee, there are post-employment legal obligations that you need to be aware of regarding confidentiality, restraint of trade, and intellectual property. Indeed, you must be aware of these obligations to know what you can and cannot do after termination of employment. It is a sensible idea to have your employment contract reviewed prior to the start of employment to understand what obligations you agree to.
Frequently Asked Questions
Am I bound by confidentiality post-employment?
Through doing your job, you gain access to your employer’s confidential information. Often your employment contract will include a clause restricting you from disclosing confidential information obtained during employment both during and after employment.
What is a restraint of trade clause?
Some employment contracts may include a restraint of trade clause. This is designed to prevent or deter employees both during and for a period after employment from working for a competitor or starting a competing business (non-competition) and soliciting clients, employees, contractors or suppliers (non-solicitation).