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Twitter vs Threads | Could Employment Restrictive Covenants Apply?

Elon Musk, the embattled CEO of Twitter is threatening to sue Meta, headed by Mark Zukerberg. Mr Musk alleges that Meta used Twitter’s trade secrets and intellectual property (IP) to build Threads as well as hiring dozens of ex-Twitter employees.

A letter sent by Alex Spiro, an outside lawyer for Mr Musk, alleges that Meta engaged in “systematic, wilful, and unlawful misappropriation of Twitter’s trade secrets and other intellectual property.”

We need to emphasise that this article discusses the law in England and Wales. American law is quite different, and it is beyond the scope (and perhaps usefulness) of this piece. In England and Wales, an employer can attempt to protect confidential information and trade secrets by having employees sign a restrictive covenant. They can also include a confidentiality clause within the company’s employment contracts.

What Is A Restrictive Covenant In An Employment Contract?

A restrictive covenant is a term in an employment contract that can restrict a former employee’s conduct after they have left your business. There are several types of restrictive covenants, including non-compete, non-solicitation, non-dealing, and non-poaching covenants.

Is A Restrictive Covenant Legally Enforceable?

If a claim to enforce a restrictive covenant is brought before the Court, it must have regard to the doctrine of `restraint of trade.’ This principle states that people should be free to follow their trade and use their skills without undue interference. 

Any contractual term restricting an employee’s activities after termination is void for being in restraint of trade and contrary to public policy, unless the employer can show that:

• There is a legitimate interest that is appropriate to protect.
• The protection sought is reasonable having regard to the interests of the parties and the public interest.

The Court applies the following key principles in assessing and enforcing post-termination restrictive covenants:

• To be enforceable, a restrictive covenant must be designed to protect a genuine ownership interest of the employer. 
• Post-termination restraints are enforceable if they are reasonable, having regard to the interests of the parties and the public interest. The question of reasonableness is at the point when the covenant was entered into, not in the light of subsequent events.
• Restrictive covenants having the sole aim of preventing competition are never upheld by the Court. A non-competition restriction must be designed to protect the employer’s confidential information, trade secrets, or customer connections and prevent the employee from obtaining an unfair advantage.
• Restrictions must be no wider than necessary. 

Essentially, the Courts will not uphold a restrictive covenant that merely prevents an employee from accepting a position with a competitor or opening their own business in competition with their former employer. For it to be enforceable, there must be an advantage or asset that the employer aims to protect, for example, a client list, key staff members, or a particular innovation that makes their product or service unique.

How Can A Company Protect Confidential Information And Trade Secrets?

An employment contract can include the protection of confidential information during and after employment. A restrictive covenant can include restrictions on using confidential information and trade secrets after the employment has ended.

Such clauses can also be incorporated into commercial agreements with third parties that require access to information to undertake work assigned to them.

In addition to express clauses, all employment contracts contain an implied term that the employee will serve their employer with good faith and fidelity whilst in employment. This means whilst in employment, employees will not under an implied duty of good faith and fidelity, disclose such information to third parties or use it for their own gain.

Conclusion

Whether Elon Musk will actually launch a legal claim against Meta is debatable. He has in the past threatened legal action but not pursued further action. It would be surprising if Mr Zuckerberg’s extensive legal team had not run a risk assessment for potential lawsuits before employing ex-Twitter staff. They will have closely scrutinised Twitter employee’s employment contracts to assess the nature and extent of the confidentiality clauses and restrictive covenants and the extent to which any terms could be successfully enforced.

It may be worth mentioning that there has been a Government consultation regarding introducing a three month statutory limit on the length of non-compete clauses. As at the time of writing, there has been no update to the consultation findings.

In conclusion, the best way to protect your organisation’s confidential information and trade secrets during and after an employee has left your employment, is to have carefully drafted restrictive covenants in your employment contracts that will be enforceable in a court of law and/or review your existing terms to ensure you are not left exposed when a key employee leaves your company.

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Supporting Employees with UK Visa Fees: Costs, Benefits & Clawbacks

UK Visa applications fees are becoming increasingly costly; the visa fees for a Skilled Worker visa for five years can exceed £12,000 for the main applicant. The importance of hiring skilled workers to assist in an entity’s growth and success versus the upfront cost of doing so creates a nexus.

A key decision for employers is consideration of the financial level of support provided to current or prospective employees hired under a skilled worker sponsorship licence.

Overview Of Fees

For most UK work related visa application, Government fees constitute the majority of the total costs, usually these fees will exceed professional legal fees. Government fees include the visa application fee, the Immigration Health Surcharge (IHS), the Certificate of Sponsorship (CoS) fee, and the Immigration Skills Charge (ISC). Other optional fees include priority services fees to expedite a visa application.

The Level Of Financial Support Provided By Employers

Whilst many employers will have a well-established policy in place to guide them, many employers do not. The extent of support that an employer can offer to provide can range from, the employee covering all of the fees (that they are legally required to pay) to employers paying for all of the fees associated with the visa application.

Many Employers Adopt An Ad-Hoc Approach and Base Their Decisions Upon A Varity Of Factors Such As:

• Seniority of the employee
• Their skill-set
• Their shortage in the employment market
• Departmental budgets
• The demand for the employee against business needs

Employers Take One Of The Following Approaches Generally:

1. Covering the full costs associated with the immigration application for the employee. Some employers will also cover the costs of the employee whilst others will not.
2. Paying only the professional fees and requiring the employee to cover all of the other costs that can legally be passed on.
3. Paying the mandatory fees in order the employee to be employed but not enhanced fees such as priority service to expedite an application.
4. Requiring a minimum length of service with clawbacks if the employee leaves prematurely.

Important Considerations For Employers

1. Employers need to consider, socio-economic factors such as labour trends along with inflation rates, shortage of talent, the cost-of-living crisis, employee morale and well-being.
2. There have been instances of employees rejecting or withdrawing from job offers over a lack of agreement as to who will pay the visa costs. It is important for relocation packages to balance the cost of visa fees with the ability to attract and retain talent critical to an entity’s success.
3. Employers should be duly advised as to the legal options available to them to protect their investments in respect to visa applications. Employers can insert a minimum service length clause. This means, if an employee leaves before reaching the requisite length of service the employer can clawback a percentage of the visa application fees.
4. It is important for employers to be consistent with the level of support that they offer. A case-by-case approach can lead to an imbalance in employee morale and give rise to potential discrimination claims.

Clawback Clauses

If an employer intends on inserting a clawback/repayment clause into their contract, they will need to consider the following relevant points:

• The rule against penalty clauses in the event of a breach of contract (an individual signs the contract and begins the visa process but does not commence employment);
• The principles surrounding restraint of trade (where there is no breach but the individual leaves within a few weeks or months such that the employer has not had the ‘benefit’ of the financial investment made;
• Discrimination.

To avoid any attack on the enforceability of a repayment clause, the contractual term must be proportionate. A ‘sliding scale’ based upon a greater reimbursement if an employer leaves sooner rather than later will be an important element to increase the prospects of the term of the contract being enforceable.

Conclusion

Hiring highly skilled individuals to grow or enhance your business is a primary aim when employing an individual from abroad. The initial outlay in visa application costs can be daunting. However, in our experience clients with a well-prepared policy or agreement in place, should the intended hire fail to commence work or leaves prematurely mitigate the cost risks associated with sponsorship.

Quastels

Our corporate immigration team can provide holistic legal advice across employment and immigration law. If you require advice or assistance in preparing a clawback or repayment agreement, contact Jayesh Jethwa at corporateimmigration@quastels.com

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Sickness Absence: Why You Should Take Your Employees’ Mental Health Seriously.

The impact of work-related stress, burnout, and poor mental health on the UK economy is a significant concern. The latest economic modelling by AXA UK and the Centre of Economic and Business Research reveals that this issue costs the UK economy £28bn per year. This cost is primarily due to the loss of 29.3 million working days from employee sick leave.

These figures highlight the need for employers to be proactive in addressing employee mental health concerns. By recognising early warning signs, employers can promote a culture of openness where employees feel safe to discuss their issues. This not only reduces the likelihood of short term persistent absences or long term sick leave, but it also demonstrates a commitment to employee wellbeing.

Sickness absence can have a considerable impact on a business, affecting productivity and profitability. Therefore, taking immediate steps towards addressing this issue is crucial. Employers of all sizes can benefit from implementing impactful measures to reduce sickness absenteeism in the workplace.

One such measure is providing valuable training to managers. This training can include identifying “red flag” scenarios and teaching managers how to handle them effectively. Additionally, employers can prepare bespoke policies tailored to their working environment, which can help to create a supportive and healthy workplace culture.

Overall, it is clear that addressing work-related stress, burnout, and poor mental health is a vital concern for employers. By taking proactive steps to promote employee wellbeing, businesses can reduce sickness absenteeism and improve productivity and profitability. If you are an employer looking to address this issue, please feel free to get in touch with us for an initial conversation.

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