18/03/2015

Michael Farrelly, employment lawyer at Excello Law. He will be hosting a free seminar on the topic on 26th March 2015 in London.

Trying to prevent departing employees from poaching clients and taking contact databases has always been a big issue for SMEs but the increasing importance of LinkedIn in the business community is throwing up a new challenge.

Employees, particularly those with a client-facing role, are these days generally encouraged by their employers to connect with clients and new business leads over LinkedIn. Having an up to date CV, joining industry groups and regularly posting engaging content up on the site is considered an important part of the marketing mix.

But what happens when an employee moves on? As the economy picks up and recruitment increases people are starting to move around more. But businesses want to hang onto the clients they have and are increasingly seeing employees walking away with what is effectively a large portable contact database. They will update their profiles with details of their new company and LinkedIn will send out an automatic message to all of their contacts letting them know they are in a new role. This poses a real problem for businesses whose standard contracts, with clauses preventing the soliciting of clients, will not cover these kinds of automatic updates.

The use of LinkedIn to further a new competing business before an employee has officially left has been found to be unlawful, as has downloading an employer’s database to LinkedIn just before leaving. Ownership of the LinkedIn contacts network or ‘database’, however, is a legal grey area and is pretty much untested by case law. This means employers need an explicit policy in place to cover this issue, enabling them to request that departing employees remove clients from their LinkedIn contacts in the same way they would be prevented from taking a database of Outlook contacts with them.

Employers should implement a clear policy on the use of social media that insists all contacts added to LinkedIn (and other social media) in the course of employment are deleted and passed on to the employer on termination of the employment contract, and that they will not be added again at a later date. Potentially, new employees could be compelled to open a new account and pass access on to their employer on termination. Ideally any policy should be cross-referenced to the employment contract and a clause inserted in there too. Post-termination restrictive covenants (which should be constantly reviewed in any event) should be tailored to include a reference to social media contacts and explicitly detail that the LinkedIn “new role” emails amount to solicitation.

This is all well and good for new employees but for SMEs, protection from the departure of established employees will be even more important. This will require a change to the terms and conditions of employment and to be properly enforceable, any change to the contract will require negotiation with staff and, particularly where new restrictive covenants are involved, may require one off payments or pay rises to secure agreement.

The implementation of more stringent restrictive covenants may prove a headache in the short term but, for those running businesses where client contacts and relationships are key to success, keeping them secure from being poached by departing employees will prove invaluable.