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iGlobal Strategic Guidance Series 3: Business protection
(1) Taking a global view
Employment Documentation• Clausesthatareunenforceablebecausetheyarepoorlydraftedorfailtotakeproperaccountofthelocallawandthecircumstancesandroleoftheemployee
• Globalpolicydocuments(e.g.NDAs,CovenantsinStockPlansorGlobalBonusSchemes,BusinessConductandEthicsPolicies)thatareunenforceableatlocallevel–perhapsbecauseofthewrongchoiceofgoverninglaworbecausetheywerenotexecutedinaccordancewithstrictlocalrequirements
• Inconsistenciesbetweenglobaldocumentsandlocaldocuments,forexample,aglobaldocumentmaycontainarestrictionstatedtoapplyforoneyearwhilethelocaldocumentappliesasixmonthperiodforthesamecovenant
Poor Management of Documents• LocalHRagreeingtoadhocamendmentsthatweakenprotection;failingtoupdatethebusinessprotectionclausesinlinewithchangesinlocallawortheemployee’srole,seniorityormainworklocation
• Obtaininganunnecessaryrestrictivecovenantinacountrywherecompensationispayable:thiscanbeanexpensiveerroronterminationoftheemployment
Monitoring Legal Developments • Howtokeepontopofbusinessprotectionissuesasthelawchangesacrossmultiplejurisdictions
• Howtokeepontopofdocumentchangesthattrackanevolvingbusinessandanemployee’schangingrole
Lack of Strategic Approach• Nointernalstrategythatsupportstheemploymentdocumentation;forinstancenopolicyonwhohasaccesstoconfidentialbusinessinformation,therebyreducingtheabilitytoargueitisconfidentialatall;notrainingofstafformonitoringoutcomes
• Nostrategicapproachtorestrictivecovenants–whatdoesyourbusinessreallyneedineachcountry?
ThiseditionoftheiGlobalStrategicGuidancelooksatthemainrisksandthecoreelementsofaworldwideemployeebusinessprotectionplananditsimplementation.
Wehaveincludedforillustrationahighlevelsnapshotofkeyjurisdictionsworldwide.
Whatdoyouneedprotectionfrom?Mostbusinessesneedtoconsiderprotectingthemselvesinthefollowingareas:
Intellectual property–whoownsapieceofvaluableIP(design,patent,copyright,know-how)developedbyanemployeeduringtheiremployment?
Confidential information (trade secrets)–someofyouremployeeswillhaveaccesstoclientlists,pricing,supplierlists,strategicplansandIP/know-howforthepurposeoftheiremployment
Trade connections and relationships–youremployeesmaybuildupvaluablebusinessrelationshipswithyourclientsandsuppliersinthecourseoftheiremployment
Talented/valuable employees–yourmosttalentedemployeesmaybetargetedforrecruitmentbydepartingorformercolleaguesorbyyourclients
Conflicts of interest–employeestakingonotherworkoutsideworkinghoursforthirdparties(e.g.ontheinternet)thatriskcausingcompetitiveharmorreputationaldamagetoyourbusiness
Fortheglobalemployer,whatarethemainchallenges?Laws and Courts• Countriesthatdon’trecogniseIPornon-competecovenants
• Countrieswheretheenforcementprocessisprohibitivelylong,expensive,uncertainorheavilyweightedtowardstheemployeeortheirnewemployer
• Widevariationsbetweencountries,particularlywhenitcomestoIPandcovenants:whatcanbeprotected,forhowlongandatwhatcost
• Underdevelopedbusinessprotectionlaws,especiallyinsomesmallercountries
Youremployeesnodoubtareyourgreatestassetsbutlikeallassets,theycanbringnon-criminalbusinessrisk.Protectionagainstthoserisksneednotbedifficultorcostlybutmanyinternationalbusinessesoverlookthebenefitsofhavinginplacestrongglobalemployeebusinessprotectionplans.Thecostsofnothavingonecanbesurprisinglyhigh.
Inducing a New Employee Breach• Businessprotectionisalsoaboutprotectingyourbusinessfromrogueemployeeswhobreachcovenants/obligationstotheirformeremployers.Insomecountries,youcanbesuedifyouknewaboutthebreachandencourageditoreven,didnothingtopreventit
•
AStrategicApproachtoEmployeeBusinessRiskAssess the Legal Issues and Employee Roles in each of your Jurisdictions • Mapthebusinessprotectionenforceabilityineachofyourjurisdictionsfor(1)IP;(2)restrictivecovenants;(3)confidentiality(4)compensation;and(5)courtaccessandperformance
• Maptheroles,gradesandcountries(orstates/regions)whichrequirebusinessprotectionmeasures.Notallrolesneedprotection.
Agree a strategic approach• Chooseaclearapproachforeachroleineachcountry.Forexample,aglobalapproachtorestrictivecovenantsmightbe:(a)incountrieswherenocovenantcompensationispayable>alwaysinclude;(b)wherecompensationispayablebutthecovenantscanbewaivedonterminationtoavoidcompensationpayments>alwaysincludebutmakesureyourHRsystemsimplementthewaiverwhenneeded;(c)wherecompensationispayableandyoucannotwaivethecovenantontermination>onlyincludeforrolesthatclearlyneedprotection
• Haveawellunderstoodandconsistentapproachtoemploymentdocumentation:centralisedwithlocalvariationsorwhollylocal(seebelow)
• Haveclearlinesofauthorityfornegotiatingandsigningoffemploymentcontracts–bewarelocaldrift
• Wherelocalenforceabilityispoorhaveapre-agreed,pragmaticapproachtoabreach
Have the best employment documents• Ensureyourdocumentsreflectyourbusinesspracticesandneeds–ifnot,theymaynotbeenforceable
• Decideonacentralisedorlocalisedapproachtoemploymentdocumentation:thecentralisedapproach(globaltemplatewithlocalvariations)iseasiertocontrolbutrisksbeinglessenforceable;localcontractscanbehighlytailoredbutarelessmanageableandleadtovariationsacrossthegroup,undermininga‘onebusiness’ethos
• Decidewhetherthebusinessprotectionmeasuresshouldallgointoonedocument(theemploymentcontract)orbesplitintoseparatedocuments–e.g.aseparatenon-disclosureagreement-thelatterhastheadvantagethatyoucanupdateitregularlywithouthavingtoissueanentirelynewemploymentcontract
• Haveinplaceamonitoringandupdatingsystemthatpicksuplocalchangesinthelawandmakesanynecessaryadjustmentstoemploymentdocumentation–itwillbecheaperinthelongruntodoaquickreviewannuallythanamajorreviewperiodically
• Requirenewhirestoundertakethattheyarenotinbreachofanypriorrestrictionstoformeremployers
• Considerobtainingupdatednon-disclosureortrustandconfidenceagreementsfromemployeesatmilestoneeventssuchasthegrantofsharesorpaymentofbonuses,promotionsorsalaryincreases
Aim for deterrence anyway• EvenwherethelocalcourtswillnotenforceIPorrestrictivecovenantprovisionsconsiderincludingthemasadeterrentormoralobligation
• Wherepermitted,makeuseofpenaltyclausesbywhichtheemployeeindemnifiesyoufortheirbreach
• Ensureyouremploymentcontractcontainsrightstomonitoremployeeactivityduringemployment,therighttorequesttheemployeesignsanundertakingofcomplianceandtheobligationtonotifyanewemployerofhisorhercontinuingobligationstoyou
Decide how you will enforce • Haveanagreedenforcementpolicy,possiblyforeachcountry:aimforthebestdeterrentapproachinthecontextofeachjurisdiction
KEY P = Protectable via robust clauses in the contract or separate NDA C = Compensation must be paid to the employee for IP protection
IP Protection (P)Compensation (C)
P
P
P and C
P
P and C
P
P
P
P and C
P and C
P and C
P
P
P
P and C
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iGlobalLaw71QueenVictoriaStreetLondonEC4V4AY
T:+44(0)2074061639E:[email protected]
Wewouldwelcomeyourfeedback:PleasecontactKarenMosley
Global labour and compliance law solutions for multi-national employers
Thispublicationisforgeneralinformationonlyanddoesnotseektogivelegaladviceortobeanexhaustivestatementofthelaw.Specificadviceshouldalwaysbesoughtforindividualcases.iGlobalandiGlobalLawarethetradingnamesofWBGlobalLimitedwhichisaprivatelimitedcompanyregisteredinEnglandandWaleswithnumber8181382atregisteredaddress71QueenVictoriaStreetLondonEC4V4AYandisauthorisedandregisteredbytheSolicitorsRegulationAuthority.Thisreflectsthelawasatthedateofpublication,March2018.ProducedbyPWM
Country
Australia
Belgium
Brazil
China
France
Germany
Hong Kong
India
Italy
Japan
Mexico
Netherlands
Singapore
South Africa
Spain
UK
Business Secrets protection?
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
Covenant payments required?
No
Yes except for salespersons
Yes
Yes
Yes
Yes
No
Not applicable
Yes
No but good idea
No
No
No
No
Yes
No
Penalty clauses allowed? Restrictions apply.
Yes
Yes
Yes
Yes
Yes
Yes
No, generally
Yes
Yes
Yes
No, generally
Yes
No, generally
Yes
Yes
No, generally
