Restrictive Covenants in iGaming - as published in iGaming Busines
The current wave of industry consolidation has heightened risks of key staff leaving and taking valuable confidential and strategic information with them. James Anderson looks at how iGaming businesses can help protect themselves through the use of restrictive covenants.
Gaming organisations commit a lot of effort to ensuring that they spot those seeking to exploit inside information, and understandably so, when you then imagine the proprietary intelligence an executive can accumulate and how valuable this intimate knowledge would be to a competitor.
Such risks have been compounded by the growing number of consolidations within the gaming sector and while a merger can legitimately acquire proprietary knowledge, it also will see key staff leaving where posts are duplicated and taking their expertise with them, potentially to a competitor.
What if a senior manager wants to leave a business to join a competitor? Can an employer stop him taking this and other strategic information with him? Similarly, if the sales manager wants to leave, can he be prevented from approaching customers and poaching members of the sales team? The answer will depend on what steps have been taken to protect a business. There are a number of tools available to do this. These have to be within a contract of employment. They can include: -
1. A confidentiality clause specifying what information the employee must keep confidential and for how long.
2. An Intellectual Property clause specifying what patents, trade-marks, copyright, design rights and rights in confidential information you have and preventing the employee from taking or using these when he leaves your employment. This can protect your company property including your data base of customers and your right to a particular design or trademark.
3. A restrictive covenant preventing the employee after the termination of his employment from: -
- Soliciting customers;
- Poaching employees;
- Interfering with suppliers;
- Dealing with customers; and
- Joining a competitor.
There is a myth sometimes peddled that restrictive covenants are not enforceable but this is not true. You are not allowed to restrict an employee just to stifle competition but you can restrict an employee to protect what are sometimes called “legitimate business interests”. In short these are:-
The main disadvantage of garden leave is that you are paying the employee not to work!
If you wish to restrict the employee after his employment has ended, you can use restrictive covenants (sometimes called post termination restrictions). However, to be enforceable, restrictive covenants must be carefully drafted. They must be no wider than is reasonably necessary to protect the legitimate business interest you wish to protect. What you, the employee and a judge consider to be reasonable may well be three very different things.
To draft enforceable restrictions, you should firstly consider what it is that you are trying to protect and choose the type of restrictions you need to do this. For example, a clause preventing an employee dealing with a competitor is much more restrictive than a clause preventing an employee soliciting your clients. This is because a non-solicitation clause does not prevent an ex-employee doing business with a customer who approaches him within the restricted period but a non-dealing clause does. However, you might require a non-dealing clause where, for example, you risk being exposed to a significant loss of business due to a close personal connection between the employee and customers, resulting in customers naturally gravitating towards him if he moves employers.
The articles published on this website, current at the date of publication, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your own circumstances should always be sought separately before taking any action.