Fair Balance between the Economic Interests of the Employer and the Public Interest - Essay Example

The Courts Have Struck A Fair Balance Between The Economic Interests Of The Employer And The Public Interest In Allowing Employees To Utilise Their Skills Once The Employment Contract Has Ended.” Discuss With Reference To the Case Law on Restraint. Table of Contents Introduction 3 Background of the Statement 4 Critical Evaluation 6 Law Developed To Balance Employer and Employee Concern 7 Effective Way of Providing the Balance 8 Public Policy Issues on Restrictive Covenant 9 The Law Relating To Restrictive Covenants 10 Conclusion 12 Introduction Law is regarded as a set of rules and regulations that guide the conducts of an individual in a particular society. In this rapidly transforming business environment, it can be ascertained that the employers as well as the employees associated with any business reap significant opportunities by developing their respective sophisticated skills and technical knowledge. Law is often determined as term of agreements, which articulates various rules and ethics of general application in order to conduct operations based on the agreement norms or conditions. Similarly, shift in the market conditions has directly and indirectly affected the relationship prevailing between employers and employees of a particular organisation. In this regard, the courts remain continuously engaged in re-evaluating the legal provisions in order to provide maximum protection and safeguard the interests of the involved parties. Departure of key employees from an organisation is regarded as a major threat for any business, as the knowledge and understanding of the previous employers may generate negative results in terms of disclosing confidential information. Thus, in order to build strong association between the employees and the employers, employment contracts are generally made. In this regard, it can be found that various laws are enforced for balancing employers’ economic interests and employees’ public interest in the form allowing them to utilising their skills after the end of the employment contractual agreement1. Correspondingly, this essay intends to discuss and analyse the importance of court legal approaches regarding the ‘non-compete agreements’ through evaluating how laws balance the concerns of economic and public interests. Moreover, the essay will determine whether there exist any effective way of providing balance along with identifying the law relating to restrictive covenants and public policy issues. Background of the Statement In most of the employment contractual agreements, the provision for non competition containing the clause that prevents the employees from being engaged in conducting activities, which might create direct or indirect competition to employers. Moreover, the provision for non solicitation also restricts the employees to get involved in soliciting other employees, which restricts them to share business information with any outsider party. This provision enables the employers to protect their economic interests from any unlawful act of the employees. In this context, employers enter into varied employment agreements in order to reduce the possibility of any economic harm with restricting the employees based on the agreement. In this regard, Cabrelli2 argued that it is important for the businesses to form mutual trust as well as confidence along with providing reasonable degree of care and well being to the employees. Cabrelli also stated that the implied duties of confidence and trust between employees and employers are duly considered as important aspects that aid in preserving the balance between maximum interest and concern amid the parties. Moreover, in certain circumstances, going beyond the restrictive clause, may result harmful to such employer. Besides, it is also important for the employers to treat employment agreements in the similar manner for all the employees in various situations to avoid biasness prevalent amid the employees. These lawful guidelines generally vary from one state to other and also the contractual agreement of the businesses. Thus, it is important to consider that the terms of the contractual agreement between an employer and employee should be in such a manner that will assist both the parties to protect their respective interests and strengthen the relationship3. Honeyball & Pearce4 stated that contract of employment should be prepared and consider the importance of the parties involved in the agreement. It is important for the employers to form a clause with logical rights along with obligations of the parties in employment contact with mutual acceptance of tenure of bounding based on good faith. Correspondingly, laws related to utilising employment related skills once the employment contract gets ended are proving to be essential clauses considering various restrictive covenants. In this regard, courts recognise the importance of freedom of utilising the skills and knowledge that have been acquired by the employees during the previous employment for developing public interests along with enforcing certain restrictive covenants to protect the economic interests of the employers5. In relation to the case law of AIB vs. Diamond, it can be viewed that the six defendants who were the employees of the plaintiff company, started a new business, which eventually generated stiff competition with the previous employer. In this case, the court defends the plaintiff company on the ground of restrictive covenant. According to the doctrine of restrictive covenant, it can be affirmed that employees can utilise their knowledge and skill regardless of their carrier development rather than competing with such organisations that they already left6. With regards to the case law of Net Affinity vs. Conaghan and Revemac Ltd., it can be inferred that the court has significantly granted injunctive relief in order to avoid breach of agreement by the defender on the duty of confidentiality to the plaintiff. In accordance with the principles of confidentiality clause, the court will grant assistance through preserving the company from breaching the contractual terms and conditions7. According to the case law of Thomas vs. Farr plc, it can be apparently noted that the defendant i.e. Thomas breached the contractual terms based on the aspects of mutual trust and confidence. The doctrine of disclosure of trade secret clauses may be applicable in this case, as certain key principles and mode operations were followed by Mr Thomas. In such a scenario, the respective court will analyse the matter to determine the knowledge, which gained during the previous employment and used after the termination of the employees. As per the decision made by the court, provision regarding the ‘non-compete clauses’ is applicable, if there is need to protect the business interests. Nevertheless, this restrictive clause is not been applicable, if the employees use their skills of not harming previous employers in the form of raising any potential dispute. Consequently, as per the law related to maintaining fair balance of rights of employers and employees, it can be ascertained an employer may claim for the damages if after the end of employment agreement, the employees hamper the position of previous employers. In such case, the court will protect the company on the basis of restrictive and confidentiality agreement between the parties8. Critical Evaluation Law Developed To Balance Employer and Employee Concern The law developed in order to enable the employees to utilise their skills after the end of employment contract will certainly help in facilitating both economic interests of the employers and public interests of the employees through the execution of effective legitimate provisions. Courts do not enforce law in order to prevent the interest of one party in the form of imposing restrictive covenant based on the maximum interest of the parties. Court’s recognition regarding struck a balance between the employers and employee can be justified in the form of facilitating the employees to use their respective skills after the end of employment contractual agreement. This ultimately enables to form a relationship of mutual trust as well as confidence and prevention of being exploited by the employers to employees. It will be vital to mention in this similar concern that utilising the necessary skills after the end of the contract is important for the employees to meet their respective desired needs. Notably, there exist various implied terms in a contractual agreement, which assists in protecting employers’ interests and also determining employees’ desire to continue with their employment. With the help of restrictive covenants, information is protected after the end of the employment contract. This clause may certainly help in enabling the employers to get protected from skilled staff in unfair means. Thus, such clauses enable to protect the economic interests of the employers in the form of evading the possibility of future competitors to gain success. Likewise, it will also ensure in providing greater protection to the employees in terms of employment opportunity concern and creation of wealth after the end of employment contract. Hence, the restrictive clause will enable to form and maintain greater balance between the economic interests of employers and public interests of the employees after the end of employment contract9. Effective Way of Providing the Balance In any organisation, employees play an imperative role in enabling a business to attain greater success. However, it can be noticed that at the time of leaving or termination of the employees from any business, varied public policy issues are deemed to be settled. In order to protect the interests of business, employers remain much concern on assessing various factors that tend to protect the non-viability of the same. Confidentiality clauses, restriction provisions and garden leave clauses are regarded as the most commonly used policies to protect the interests of businesses. But, in order to form and maintain proper balance between employers’ and employees’ interests, it is important that the clauses should be effective and consider the stake of both the parties involved in a contract to ensure high level of acceptance of the same10. In accordance with the principles guided in English law, effective way of maintaining greater balance between the interests of both the parties is restrictive on covenant clause. This will certainly allow the involved parties to bind within the contractual provisions in the form of limiting the freedom of the employees after the end of employment contract. In relation to the principles of the above stated law, restrictive covenants are termed as effective ways to provide and build proper balance between the involved parties, making the employment contracts more void and unenforceable. It will be vital to mention that this will certainly become enforceable, if the employers having any sort of legitimate business interests that need to be protected. Nevertheless, the provision is important to form proper balance between the parties because in this manner, the employers can protect their respective trade secrets, strengthen customer connections, retain the involvement of workforce and most vitally preserve confidential information among others. Specially mentioning, the notion of restrictive covenant also enables the employees to use and provide good faith from their previous employers. Based on this idea, the employees can execute their own skills as well as knowledge in the form of keeping the information of ex-employers quite confidential. Thus, the courts often take into concern all the important circumstances and facts while enforcing restrictive covenants in order to ensure that the clause will prove to be quite favorable in ensuring greater protection of employers’ as well as employees’ interests11. Public Policy Issues on Restrictive Covenant According to English law, restrictive covenants are subjected to varied public policy issues that are often termed as quite void as well as unenforceable because of the prevalence of unreasonable restraint. Moreover, this restriction can be enforceable, if an employer can show that there lays the requirement of keeping business interests more protected. The main reason due to which the issue arises in such contract is that the provision of contract agreement often lays the basis of balancing employees’ and employers’ interests by a considerable extent. One of the public issues relevant to restrictive covenant can be apparently noted as the time i.e. the proper duration of restriction. Justifiably, if the restriction time is long, the public policy issues get highly affected. Another form of public issue can be the extension of the geographic location within which the restrictive covenants will be enforceable. In this regard, wider the area of restriction will led towards massive difficulties in making the restrictive covenants to be enforced. Similarly, the nature of the business activities that should be included in restrictive covenant is often difficult to determine12. Correspondingly, the public policy issue on the restrictive covenant mainly arise because of certain difficulties that are faced regarding position of the employees, competitive business position, employers’ business position, trade along with customer consideration, ‘period of stagnation’, period of notice and industrial norms among others. Specially mentioning, any mismatch will certainly create a difference between employers’ and employees’ interests, resulting in promoting public policy issue13. The Law Relating To Restrictive Covenants With regards to analyse the law relating to restrictive covenants, it can be affirmed that every business possess certain sort of confidential information and data that are highly integral towards attaining superior competitive position and ensuring long-term sustainability. Additionally, in order to safeguard their interests, various policies and restrictions are duly imposed that emphasise preventing any information to be misused and taking effective decisions among others. However, a few of the ex-employees having in-depth knowledge regarding technology, strategic planning and customers’ requirements may prove to be beneficial for the new employers in the context of boosting their market position. According to the principles of English law, the laws relating to restrictive covenant are duly considered to be employment clauses that prohibit the employees after being terminated or at the end of employment contract. Besides, such clauses also prevent the ex-employees to engage in soliciting or using trade secretes prior to end of the employment contract. Based on the above stated principles of English Law, the term restrictive covenant will be regarded as void and enforceable on the ground of ascertaining that employers need to conduct ‘restraint of trade’ with divergent to public policy. However, an employer is not entitled to be protected from its ex-employees, if the employer fails to convince the court that their interests have been affected with the acts performed by ex-employees. In this similar context ‘non-compete clause’ will be equally enforceable in order to protect the interests of the legitimate businesses with regards to the factors concerning the connection prevailing between the clients, classified and confidential information and retaining other workforce. The courts held that there are four types of restrictive covenant that employers can enforce. These mainly include ‘non-competition covenant’, which tends to prohibit the ex-employees to join similar business, ‘non-solicitation covenant’ that restrict poaching of suppliers or clients of ex-employer and ‘non-dealing covenants’, which prohibit the employees after the end of the contract to deal with the clients, customers or the suppliers of its former employer. Finally, ‘non-poaching covenants’ restrict the employees from being engaged in poaching former employees of ex-employers14. Correspondingly, the clause of ‘Garden leave’ can also be enforceable with the restrictive covenants in order to provide maximum protection to the employers. The inclusion of this clause in an employment term will held the employees to serve the period of notice after the end of the period of employment and will obtain the salary as well as other benefits for a definite period. In relation to breach the terms of post-termination restriction clause, an employer can take remedial actions against the stated issue. In this regard, the employers need to file an application for having breach in confidential information and clause. Furthermore, the court, by taking into concern, the gathered evidences and support, can restrict the employees to engage in breaching the contract agreements. Similarly, the employers may also claim for financial remedies in respect of breaching the restrictive covenant of employment in account of proper evidence of losses15. Conclusion From the above analysis and discussion, it can be ascertained that law imposes massive impact on forming as well as maintaining the balance between the interests of employers and employees. In certain situations, various issues arise that lead towards a mandate for protecting employees’ along with employers’ interests. In this regard, the restrictive covenant provisions help the employers to remove unfair trade practices and policies of various employees to gain significant advantage in the market in the form of engaging with other companies. In conclusion, it can be affirmed that the restrictive covenants should considers various important factors including the competition in the market and respective interests of the employees as well as employers with the aim of preserving the same in longer run at the end of employment contract. References Ashurst LLP. ‘Restrictive Covenants and Team Moves’. Quickguides, 2013, pp. 1-16. Cabrelli, D. ‘The Implied Duty Of Mutual Trust And Confidence: An Emerging Overarching Principle?’ Industrial Law, Journal, Vol. 34, issue. 4, 2005, pp. 284-307. Honeyball, S., and Pearce, D. ‘Contract, Employment and the Contract of Employment’. Ind Law J, Vol. 35, issue. 1, 2006, pp. 30-55. Leblanc, R. D. & Reynolds, D. ‘Drafting Enforceable Non-Compete Covenants’. Miller Thomson LLP, 2010, pp. 1-9. O’Sullivan, S. ‘When an Employee Joins the Competition’. Mondaq, , 2013, (accessed 14 December 2014). Orelup, R. J. & Drewry, C. S. ‘Judicial Review and Reformation of Non-compete Agreements’. The Construction Lawyer, Vol. 29, issue. 3, 2009, pp. 29-44. Pinsent Masons LLP. ‘Restrictive Covenants in Employment Contracts’. Restraint of trade and contracts, , 2013, (accessed 14 December 2014). Steen & Co. ‘12 Month Non-Compete Clause Upheld by Court of Appeal’. Home, , 2014 (accessed 14 December 2014). Read More