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Is your employee competing with your business? Here's how to deal with him

by , 07 August 2013
A restraint of trade agreement is usually designed to come into effect only once your employee's employment contract has come to an end. But what if you find out your current employee's competing with your business despite this agreement? Read on to find out how you must handle this in a legal manner.

While a restraint agreement comes into effect only once his contract has ended, while he's employed by you, your employee's automatically restrained from competing with you, misappropriating your property (including confidential information), or secretly profiting at your expense.

He's legally bound to serve you faithfully and honestly.

But what happens when you find he's breached this legal duty and is competing with your business?

Here's what to do if your current employee is competing with your business

According to the Labour Law for Managers Loose Leaf Service, you can discipline an employee who breaches these duties of good faith, loyalty and honesty while working for you.

You may even be able to dismiss him if you can show:

  • He's guilty of grossly exposing your business to harm; or
  • He's completely destroyed your relationship of trust; and
  • You've given him an opportunity to explain his conduct at a procedurally fair disciplinary hearing and he hasn't successfully argued that he wasn't jeopardising your business.

For example, Rachel reports to you that Eddie has bought shares in a rival publishing company and has given your list of writers to it.

Following a legal procedure (informing Eddie of the allegations against him and allowing him time to respond, after consultation with a trade union representative if he so wishes), you need to:

  • Prepare Rachel as a witness to testify at Eddie's disciplinary hearing;
  • Request proof from the Registrar of Companies of Eddie being a shareholder in the rival company (this is information accessible to the public on request); and
  • Conduct a thorough investigation to enable you to present sufficient evidence, for example, communications from Eddie to the rival company which show he's given them your list of writers. You'd get this by, for example, monitoring his emails. Remember, you need to comply with the law on monitoring emails (The Regulation of Interception and Monitoring of Communications Act).

The bottom line: You don't need a restraint of trade agreement to discipline a current employee who's been competing with you. You need only prove she's guilty of doing so, at a fair hearing following a fair procedure.

Knowing how to deal with an employee who's competing with your business will help ensure you deal with him in a legal manner.

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