In a break from the daily discussion about AI (or is it SI…?), much is currently being written about the Federal Government’s draft legislation to implement changes to post-employment restrictions.
In some respects, it’s fair to say that aspects of the government’s proposed changes go further than anticipated, and mark a surprising conceptual limit on the contractual steps a business can take to protect itself, and a statutory incursion into over a century of developed common law. At the same time, it’s worth asking yourself some simple questions:
For all the contracts you’ve issued over the last 10 years or more, how many contained post-employment restrictions?
For those that contained post-employment restrictions, how many arose because of a express, individual based assessment that the restrictions were necessary for that person, and how many of the restrictions were individually tailored to the role at the time the contract was offered (as opposed to the post-employment restrictions just being part of your template contract)?
Of all the individuals with contracts that contained post-employment restrictions:
How many did something (or were suspected of doing something) that was in breach of the post-employment restrictions (for example, by accepting employment with a competitor)?
Of those, how many times did you commence proceedings to injunct the individual, or seek damages? If you’re one of the few that answer with a number greater than zero, you might then ask yourself whether that person would be caught by the changes today?
Of all the individuals with contracts that contained post-employment restrictions:
How many left without doing something (or being suspected of doing something) that was in breach of the post-employment restrictions?
Of those, to what extent do you genuinely believe the contractual post-employment restrictions were a determinative influence on the individual’s post-employment conduct?
Irrespective of how you answered those questions, and whatever the changes ultimately are, their introduction creates an opportunity for us to pause and re-assess what we actually need to protect within our business, and how we’re going to effectively do that. Importantly, there are a number of effective steps that all businesses can take, and more strategic businesses have already taken. While the opportunities will vary between industries and individual business, they at least include:
Reassessing your notice periods: If a key employee walking out of your business after one month’s notice is going to leave you exposed, why not use a longer notice period for that role?
Utilising the option of ‘garden leave’, rather than releasing the individual and paying out their notice: Why not get the benefit of the notice period you’re paying for? If you ensure your contract entitles you to place an exiting employee on ‘garden leave’, it’s likely to be the most effective form of restraint that you can have
Ensuring you have a contractual right to change the individual’s role and duties during the notice period: Why not reserve for yourself a contractual right to transition a new person into the role (including taking over the duties and relationships) while the exiting employee does an active hand over, or actively serves their notice period being required to do something else (and that doesn’t create risk to the business)?
Requiring departing employees to affect a full hand over of duties, knowledge and relationships: If the exiting employee has one or more of your eleven secret herbs and spices, why not make sure it’s effectively passed to someone else? Requiring the exiting employee to pull together a full role-brief and handover document which details everything about the role, current, recent and prospective relationships, business planning, workflows etc can be a useful tool for those who remain, and an important piece of evidence if the exiting employee is later found to have taken or misused confidential information, or acted in breach of their remaining obligations (including the obligations under the Corporations Act not to misuse their position or information obtained during their employment).
Identifying and correcting single points of failure in strategic relationships and business knowledge: Why park critical relationships with a single individual? If the risk of functionally single point relationships will cause an issue at the point of exit, should those relationships rotate from time to time? Do we need to establish deeper and multi-point relationships within the customer?
Treating confidential information as being confidential: If information is truly confidential, its access should be restricted, trackable, and confidential to those that genuinely need to know it. Enabling employees to have access to confidential information that is not directly relevant to their role is likely to increase the risk of misuse or disclosure, and potentially undermine its confidential character.
The ultimate substantive impacts (if any) of the changes to post-employment restrictions will ultimately become clearer with time, but irrespective, if you’re genuinely concerned about their potential impact on your business, now’s the time to be identifying and implementing real, practical protections, rather than leaving your fate to the government’s regulation of your contractual relationships.
