The fifth webinar in the 2014 series, was presented by Wan Li, Ming Henderson, Justine Turnbull and Daniel Hart, focused on non-compete and trade secret considerations from an international perspective. Specifically, the webinar involved a discussion of non-compete and trade secret issues in Europe, Australia, and China compared to the United States. This 90-minute webinar provided valuable insight for companies who compete in the global economy and must navigate the legal landscape in these countries and ensure protection of their trade secrets and confidential information, including the effective use of non-compete and non-disclosure agreements.
As a conclusion to this well-received webinar, we compiled a list of key takeaway points, which are listed below.
One size does not fit all. Requirements for enforceable restrictive covenants vary dramatically from jurisdiction to jurisdiction. Bearing in mind non-compete covenants may be unlawful in certain countries or heavily restricted, employers should carefully tailor agreements to satisfy local legal requirements and appropriately apply local drafting nuances to aid enforceability of any restrictive covenants . In addition, employers should take advantage of other contractual and/or tactical mechanisms as a “belt-and braces” approach , such as, clawbacks and forfeiture of deferred compensation (where permitted), use of garden leave provisions, exclusivity and strategic use of forum selection and choice-of-law provisions.
Employers should also take practical measures to protect their confidential information and trade secrets, including limiting access to sensitive information, using exit interviews, and (provided that applicable privacy laws are followed) monitoring use of company IT resources and conducting forensic investigations of departing employees’ computer devices.
Drafting a non-compete clause under French labour law requires specific care as Courts are particularly critical of the following: duration, the geographical and activities scope, the employee’s role, the interests of the company and the financial compensation provided by the clause. Case law and the applicable collective bargaining agreement may also provide minima to comply with and employers should be mindful of these.
During employment an employee is subject to a general obligation of confidentiality and breach may be subject to civil and criminal sanctions. Only “trade secrets”, however, are protected post-termination under certain circumstances. Employers should therefore enter into a confidentiality agreement to strengthen the protection of the company’s data post-termination.
Restrictive covenants are potentially void as an unlawful restraint of trade and are therefore only enforceable if they go no further than is necessary to protect legitimate business interests. In practical terms, this means that such covenants are only likely to be enforceable where they are fairly short in duration, the restriction is narrowly focused on the employee’s own personal activities (e.g. geographical scope) and is specific to the commercial environment. Careful drafting is key especially given the unforgiving nature of the English Courts when it comes to poor drafting even if the intention of the parties is obvious. Employers should also consider other creative and acceptable ways to aid enforceability, such as, deferring remuneration and varying and reaffirming covenants.
Absent any agreement, only “trade secrets” will be protected after employment. Employers should therefore ensure that employment contracts and/or other free-standing binding agreements provide full coverage for the protection of confidential and other valuable business information post-termination. In addition, employers should also physically protect their confidential information (e.g. encrypting data, installing passwords, secure storage, etc.) and seek to retain control of it to reduce and limit unwanted disclosure and misuse. Physical security can be a more effective and less costly approach in the long-term.
It is possible to protect an organization’s confidential information, customer or client connections, trade secrets and other proprietary interests from inappropriate use by former employees in Australia. To do this detailed consideration is required of the employee’s role and responsibilities and we as their personal situation. Further, protection must not only be included in the written terms of employment but also employed at a very practical level in the business, for example, by password protecting documents, limiting access to confidential information to those who ‘need to know’ and by expressly reminding employees in different forms about the importance of certain information and relationships to the business and their related obligations.