Minimising the damage when a senior employee leaves – and five ways to reduce the risk of it happening again

A conscientious, hardworking and formerly loyal employee hands in their notice. They’re off to join a competitor. If the last 18 months are anything to go by, this is becoming an increasingly common scenario. Covid-19 has a lot to answer for. One of the fallouts of Covid-19 seems to be senior staff and directors re-assessing their lifestyles, careers and financials. At times, they have decided that the grass is greener elsewhere.

This is an unfortunate situation to find yourself in as an employer. You will undoubtedly resent the impending need to spend time and money on recruitment, training and team building to replace this individual. However, it happens.

If this has happened to you, what are your options?

It is common, upon receiving a resignation letter from a senior employee/director, for the employer to immediately go into full commercial defence mode. Rightfully so in many cases.

Presuming contracts/policies have been correctly drafted and implemented, you could consider:

• placing the employee on garden leave
• writing to remind the employee of their ongoing confidentiality obligations and restrictive covenants, when formally acknowledging their resignation
• paying the employee everything to which they are entitled upon termination, to ensure there’s no breach of contract on the employer’s part which would render the restrictive covenants void and therefore unenforceable
• monitoring (where appropriate) the employee’s commercial activity post-termination.

Where an employee is proposing to start employment with – or be engaged by – a competitor in breach of their restrictive covenants, you could consider going one step further. Actions might include:

• checking the employee’s mailbox, voicemails, telephone logs and other communication platforms (on company devices) while the employee is on garden leave in accordance with the company’s IT and communication policy
• writing to the employee to flag the impending or actual breach of contract, perhaps seeking undertakings or written assurances from the employee that they will abide by their obligations and not begin work until their covenants have expired.
• where there has been a very clear breach, instructing specialist employment lawyers to begin preparations for, and the issuing of, legal proceedings. (You should be able to provide evidence of the breach and you should be able to establish a causal link between the conduct and actual loss suffered by it.

Considering preventative measures

It is expensive to start corrective measures (such as injunctive relief applications) to prevent employees from unlawfully competing and wrongfully using or disclosing confidential information and sensitive data.

For this reason, it is worth considering preventative measures and assessing the bigger commercial picture to try to avoid this position arising in the first place. Here are five actions you could consider.

Consider the individual in question, their team, and the wider workforce as a whole

How is staff motivation looking? Are there any flight risks? Are there are murmurings from discontented staff and, if so, why? What drives employees to perform?

Financial incentive will be key, but it often goes further – opportunity for growth, career progression, personal development, flexible working, workplace culture, workplace location, benefits etc. Is there anything that can be done to address any concerns to prevent staff leaving? Consult and communicate with staff and maintain an open-door policy where concerns can be addressed – whether informally or via your grievance procedure.

Look beyond a pay rise

Where financials are key, instead of simply offering a pay rise in an effort to compete with what’s being offered to staff elsewhere, think strategically. Assess options for various incentive mechanisms. For example, the funds set aside for pay rises could be channelled into retention bonuses – i.e. payable only when staff are still employed at a certain date and aren’t serving their notice (whether or not they’re on garden leave).

Implement an EMI (Enterprise Management Incentive) scheme

As well as or instead of pay rises, consider an EMI scheme. This is an approved employee share scheme that is available to most trading companies. Such a scheme allows employers to grant share options to key employees tax-efficiently. You can use it as a reward for their efforts within the business and/or to retain and incentivise key staff.

Be mindful that every £1 spent on staff is better than £1 spent on legal processes

Litigation is sometimes required – you cannot afford for a precedent to be set or for it to be known within your workforce (or your competitors’ workforces) that you won’t seek to enforce confidentiality and restrictive covenant provisions when it’s warranted. However, it is not always the best route. Prevention, not correction, is always preferable.

Ensure that correctly drafted contractual documentation and policies are implemented

Make sure that your contractual documentation and policies are tailored to the individual in question. Accordingly, this means they are more likely to be enforceable. Such documentation should include well drafted confidentiality provisions, reasonable and proportionate (tailored) restrictive covenants, sound garden leave provisions and, where appropriate, a suitable social media policy.