An employee leaves for the competition. How to secure the company’s know-how?

The law provides several tools securing the interests and valuable know-how of a company in the event an employee leaves to join a competitor. Such transfers on the labour market are particularly dangerous for the creative industry and event and incentive agencies whose achievements are based on unique concepts, strategies and contacts. What legal mechanisms should be used to minimize the risk of priceless know-how leaking to the competition? Here are some basic tips.

Extensive confidentiality clause

First of all, it is worth ensuring each employment agreement and contract contains an extensive clause obliging the employee to keep confidential all information about the company, its development plans, creative concepts and contractors, which he obtained while completing tasks ordered by the employer, also after the expiration of the contract binding the employee with the employer. The effectiveness of the confidentiality clause depends to a large extent on the sanctions that threaten the employee for breaking the ban on disclosing information. A commonly used solution is to impose a high contractual penalty for each case of breach of confidentiality, if it occurred after the cessation of the cooperation between the parties of the contract.

Non-competition clause

The second solution worth using is to include in the contract with the employee or contractor a non-competition clause lasting some time after the end of the cooperation. There are a few rules to keep in mind. The prohibition of competition must be signed by both parties – it cannot take the form of a unilateral statement by an employee. It should also determine as precisely as possible exactly what entrepreneurs (named or in accordance with the description of the industry, possibly also in accordance with the territory of their activity) and in terms of which positions and responsibilities the employee cannot operate within the time clearly indicated in this clause. In the case of employment contracts, article 1012 § 3 of the Labour Code requires the prohibition of competition binding upon the end of the employment relationship be accompanied by a remuneration not lower than 25% of the remuneration received by the employee before the termination of the employment relationship for the period corresponding to the non-competition period. In the case of managerial contracts, there is no such rule, however, the practice goes towards financial compensation for the grace period. Too long and broad ban of competition without remuneration could in fact be considered by courts as contrary to the principles of social coexistence and, therefore, null and void. Also in the case of a non-competition clause, a provision on a contractual penalty for its breach is recommended.

What can be done if the competition has already taken over the know-how?

If a former employee leaving to another company took invaluable information and creative plans with him or her, and develops them under the aegis of the new employer, legal protection should be sought in the provisions of the Act on Combating Unfair Competition. According to Article 11 of this Act, the use of information constituting a secret of another company by a person who in less than 3 years has ended work in this company or by a competitor is an act of unfair competition and results in civil and criminal liability. However, enforcing this responsibility requires the former employer to demonstrate that the concepts used by the former employee were secret, protected company information and to prove that the competitor is indeed basing work done by another company, which undermines its interests. So it is not an easy process. “An ounce of prevention is worth a pound of cure” the old saying says.

The article was published in the “THINK Mice” journal.