When a senior employee leaves your business to join a competitor, it can create significant risks. From the loss of clients and key staff to the potential misuse of confidential information, the impact on your business may be substantial. As an employer, it’s important to have legal safeguards in place to protect your commercial interests and reduce the likelihood of disputes.
In this article, our employer lawyers explore what employers can do to safeguard their business when a senior employee moves to a competitor.
Key Takeaways
Restraint of trade clauses can restrict a departing employee from working for competitors or soliciting clients.
Confidentiality agreements protect sensitive business information, even after employment ends.
Well-drafted employment contracts are essential for enforceable protections.
Immediate action can be taken through injunctions if a breach occurs.
Practical steps such as exit interviews and restricting access to information reduce risks.
Protecting Your Business When a Senior Employee Joins a Competitor
1. Use Restraint of Trade Clauses
A restraint of trade clause in an employment contract can prevent a senior employee from:
Working for a competitor within a set timeframe and geographic area.
Soliciting or approaching your clients, customers, or suppliers.
Recruiting your existing staff.
While courts in Australia are cautious about enforcing restraints, they will uphold them if the restrictions are reasonable and necessary to protect legitimate business interests.
For a detailed breakdown of how non-compete clauses work under Australian law see our Non-Compete Clause Australia: A Legal Guide.
2. Enforce Confidentiality Obligations
Senior employees often have access to trade secrets, pricing strategies, and client information. A well-drafted confidentiality clause ensures that this information cannot be disclosed to competitors or used after they leave.
Unlike restraint clauses, confidentiality obligations generally survive termination of employment.
Choosing between different employment law firms Brisbane offers can feel overwhelming, but Prosper Law’s proven experience in workplace disputes will make the process easier.
3. Review and Strengthen Employment Contracts
Employment contracts are your first line of defence. They should:
Clearly define confidential information.
Contain enforceable restraint of trade clauses.
Specify notice periods to give you time to manage transitions.
- Clearly define the ‘governing law’ on the employment arrangement.
Include garden leave provisions so employees cannot immediately join a competitor.
With the government planning to ban most non-competes by 2027, it’s more important than ever to review your contracts and strengthen alternative protections.
4. Take Practical Exit Measures
When a senior employee resigns:
Conduct an exit interview and remind them of their legal obligations.
Remove access to company systems and client databases.
Collect company devices, documents, and keys.
Monitor client interactions to detect unusual activity.
When it comes to senior roles, termination can be especially complex – we discuss this further in our article on executive employment dismissal.
5. Seek Legal Remedies if Necessary
If a former employee breaches their contract by joining a competitor or using confidential information, you may seek:
Injunctions to stop them from working for a competitor.
Damages for financial loss suffered by your business.
Enforcement of restraint clauses through the courts.
Real-Life Examples: How to Protect Your Business
We work with business owners to implement practical legal solutions when senior employees leave for competitors.
Here are some real examples of the steps we help employers take:
Cease and Desist Letters: If a former employee contacts your clients or staff, we can draft a cease and desist letter to put them on notice and stop further damage.
Enforcing Restraint of Trade Clauses: We help employers enforce valid restraints in court to prevent ex-employees from working with direct competitors or poaching clients.
Protecting Confidential Information: Our lawyers act quickly to stop misuse of trade secrets, client data, or pricing strategies by enforcing confidentiality agreements.
Injunction Applications: If immediate harm is likely, Prosper Law can seek urgent injunctions to stop ex-employees from joining competitors or disclosing sensitive information.
Employment Contract Reviews: We review and strengthen your contracts to ensure they contain enforceable restraint, confidentiality, and garden leave provisions.
Exit Management Advice: We guide you through practical steps such as exit interviews, retrieving company property, and removing system access.
Reach out to us today to see how we can help you protect your business.
Prevention is Key
While legal action can protect your business after a senior employee departs, the best approach is prevention. Putting strong measures in place before problems arise is the most effective way to reduce risk and safeguard your business.
At Prosper Law, we recommend that employers:
Implement robust employment contracts and include clear restraint of trade clauses, confidentiality obligations, and notice periods.
Use garden leave provisions, requiring senior employees to serve notice away from the workplace, preventing immediate access to sensitive information before joining a competitor.
Regularly review and update contract clauses to ensure they remain enforceable and relevant to an employee’s seniority and responsibilities.
Train senior staff on obligations to ensure employees understand their duties around confidentiality and post-employment restrictions.
Protect information systems and use secure access controls, monitor data usage, and maintain policies for handling confidential material.
By focusing on prevention, businesses are less likely to face disputes when employees leave – and if disputes do arise, they’ll be in a far stronger legal position.
Frequently Asked Questions
Are restraint of trade clauses enforceable in Australia?
Yes, if the restraint is reasonable and necessary to protect your business interests. Courts will assess factors such as duration, geographic area, and the employee’s role.
Can I stop a former employee from joining a competitor or starting their own business?
You cannot prevent someone from working altogether, but a valid restraint clause can restrict them from working with direct competitors in certain ways.
What happens if a former employee breaches their contract?
Many avenues are available. For example, you may apply for an injunction to stop the breach and seek damages for financial loss. Acting quickly increases your chances of success.
Do confidentiality obligations continue after employment ends?
Yes, confidentiality obligations usually survive termination and prevent employees from disclosing sensitive information.
What should I do when a senior employee resigns?
Remove access to company systems, recover business property, remind them of contractual obligations, and monitor client activity to protect your business.
Protecting your business when a senior employee joins a competitor requires proactive legal and practical measures. By drafting strong employment contracts, enforcing confidentiality, and acting quickly if a breach occurs, you can safeguard your commercial interests.
