This is the second of two articles exploring the terms of a good employment contract. In the last issue, we discussed the elements to be considered when drafting or negotiating any employment contract. In this continuation, we discuss other clauses barring the solicitation of clients or competition with an employer by an employee after his or her dismissal as well as provisions concerning intellectual property and employee confidentiality.
Whether set out in a written agreement or not, employees as a matter of course owe a number of duties to their employers. As well as fulfilling the old maxim of "a fair day’s work for a fair day’s wages," they are obliged to keep secret their employer’s confidential information at the same time as they must not conceal important information that is related to their jobs. These duties are implied by law but, in employment disputes, employers are on firmer ground when they describe such obligations in employment contracts. Therefore, an employer may want to add a general statement regarding an employee’s duties of loyalty and faithful service to the basic elements of an employment contract outlined in the last issue of Letter of the Law. Depending on the nature of an employee’s position, an employer may also want to add the following provisions (these may be in an employment contract as terms of employment or may form separate agreements that are specifically referenced within the contract).
Non-disclosure or confidentiality clauses can define the rights and remedies of an employer if an employee discloses confidential information—such as client information, trade secrets, or other intellectual property—to outsiders. These clauses should describe what type of information is proprietary to the employer, explain when it can be disclosed, describe how to obtain permission for its disclosure, and state the punishment for revealing confidential information. As employees have an implied duty not to divulge an employer’s confidential information, both during and after employment, these types of clauses are generally upheld by the courts.
Non-solicitation clauses restrict employees from soliciting a current or previous employer’s customers, clients or employees. In the absence of an express agreement, the law may imply a duty of non-solicitation on high-level employees, managers and professionals because their relationship with their employer may be said to be "fiduciary" or characterized by fidelity and trust. However, employers may still wish to execute express non-solicitation agreements with any employees who have client or customer contact. To enforce a non-solicitation clause, an employer must have a proprietary interest entitled to protection and the clause must be reasonable. Courts may strike down non-solicitation clauses that are not reasonably limited in both time and geographic area on the grounds of restraint of trade.
Non-competition clauses seek to prohibit an employee from engaging in any activity which would compete with the former employer. Because the effect of non-competition clauses can be onerous on employees (particularly in terms of restricting their employment options), the courts generally refuse to enforce a non-competition clause if a non-solicitation clause adequately protects an employer. Non-competition clauses are generally not required for clerical or administrative employees but may be necessary for professional, technical, managerial or sales staff. They should be reasonable with respect to duration and geographical area as well as the scope of curtailed activities. One option for employers is to put non-solicitation and non-competition clauses into an agreement with the proviso that, if one is found to be void, the other still governs.
Another consideration for inclusion in an employment agreement concerns an employer’s property: employers may want to stipulate that an employee has a duty to return the employer’s property upon the termination of employment. Also, if an employer is concerned about intellectual property, such as patents, trademarks, trade secrets and copyright, an employment contract may require an employee to agree to transfer ownership of all intellectual property created by the employee. An employer may also include clauses requiring employees to return everything that they used to create intellectual property and to waive all of their moral rights in such intellectual property.
On the converse side, employers are obliged under the new Personal Information Protection Act to protect the privacy of each employee. Management and employees in departments such as human resources, who are privy to employees’ personal information, must be apprised of the law in this area. Employers should remind themselves that their employees are responsible for protecting the privacy of clients and customers. Clearly articulated privacy policies and protocols need to be established and communicated to all employees. Such a policy can prevent inadvertent disclosure of confidential information by an employee or may provide a clear basis for the discipline or dismissal of an employee who deliberately breaches the policy. Accordingly, employers may wish to make adherence to privacy practices and procedures a term and condition of employment.