How do you protect your business from the departure of higher value employees?

The actions of the French Rugby Union club, Racing 92 to “initiate several legal proceedings aimed at enforcing its rights and redressing the harm done to the club” by Johan Goosen, one of their high profile players may seem to be closing the stable door after the horse has bolted, but how do you protect your business from the departure of higher value employees?

Goosen had announced his immediate retirement from rugby (at age 24) and is now listed as a commercial director in his native South Africa.  The rumour is that he wanted a move to an English club, but having only recently negotiated a contract extension, would be unable to switch clubs easily, therefore if he were to essentially rip up his contract, then he would be free to play his rugby elsewhere.

It seems to be stating the obvious but making your workplace a rewarding and fulfilling environment is a good start.  Make sure that your employees know the company values; make sure that the employee feels valued and, even more importantly, make sure you stick to your company values.  As to financial reward, most of the studies produced would suggest that financial reward is less of a motivation that many business owners would think.  Simply paying an employee more and more is not the answer because at some point your wage rise will not meet the expectations of the employee.

Beyond the creation of such a workplace, there are plenty of other legal means to make it difficult for your key employees to leave.  The starting point is the contract of employment.

Longer Notice Period

A longer notice period can cause difficulties for someone wanting to leave – their prospective new employer may not be prepared to wait for them.   Working their notice period gives you an opportunity to convince them to change their mind.  If not, then it puts you in a stronger negotiating position when discussing the exit terms.

Garden Leave

You should also make sure there is a garden leave clause, which means that they are not physically getting access to your systems or your customers, but they remain bound by the terms of their contract for the duration of their contract.  It also allows you an opportunity to force the employee to use up their accrued holiday entitlement, rather than having to make a payment in lieu of accrued holidays on termination.

Restrictive Covenants

A well drafted restrictive covenant remains a valuable tool.  Whilst most people wrongly assume that these clauses are not enforceable, provided you have spent the time when drafting the terms of any restrictive covenant, you can make it difficult for a departing employee to jump quickly to a competitor, allowing you time to shore up the defences.  Think about what it is you need to protect and for how long you need that protection.   Also make sure that as a matter of contract, any departing employee requires to firstly provide you with details of their potential new employer and also that they have to provide that potential new employer with a copy of their restrictive covenant.  Many prospective employers may remove an offer of employment if they feel that the employee will be unable to deliver on their promised outcomes, because of some restriction in place.

Confidentiality Clauses

Think about what property, physical or intellectual, is crucial to your business.  If you spell that out in a detailed confidentiality clause, then it gives you a much greater likelihood of protecting what is yours. 

Clawback of Bonus

Provided you indicate that a certain proportion of the bonus being paid relates to the employees ongoing loyalty and fidelity to your company, then you may be able to put in a clawback of bonus clause, which allows you to claim back a percentage of the bonus already paid to the employee.

Repayment of Training Costs

If you are paying for your employees to better themselves, or improve their input to your business, then they leave a more educated employee, it is possible to include within the contract a repayment of training costs, on the basis that you have not been able to extract the maximum value that you invested in their training.

Share Options

Firstly, giving employees options to own part of the company is a good way of securing their loyalty and hard work for your business, on the basis that it is partly their business as well.  The flipside is that on termination, make sure you have a definition of a “bad leaver” within your scheme and ensure that any bad leaver loses immediately any share option that they have within the company.

With a well drafted contract, then you are doing all you can, legally, to protect the business and prevent the departure of key employees.  After that, it’s up to you to make it a nice place to work.

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For More Information Contact:
Graham Millar
Mobile: 07841920102
Direct Dial: 0141 530 2023
Email:gmillar@gilsongray.co.uk

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For More Information Contact:
Stuart Robertson
Mobile: 07793 821523
Direct Dial: 0141 433 7752
Email:srobertson@gilsongray.co.uk

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The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.