[PPT] - Webinar Series: Confidentiality and Restrictive Covenants Around PowerPoint Presentation

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39 Offices in 19 Countries

Webinar Series: Confidentiality and Restrictive Covenants Around the Globe Poland, Czech Republic & Slovak Republic

16 May 2013 Małgorzata Grzelak Karin Konstantinovova

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Today’s presenters

Jane Bullen Partner and today’s moderator UK jane.bullen@squiresanders.com Małgorzata Grzelak Partner Warsaw, Poland małgorzata.grzelak@squiresanders.com Karin Konstantinovova Partner Prague, Czech Republic karin.konstantinovova@squiresanders.com

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Czech Republic and Slovak Republic

Legal regulations versus court decisions and market

practice

Reasonable protection of the employer’s legitimate

business interests x Justifiably required

Remuneration of former employees x contractual

penalties

Recognised interests include:
Protection of confidential information
Protection of customer relationships and of stable

workforce

Common types of restraint:
Non-compete (i.e. cannot work in the industry)
Non-solicit (e.g. customers)
Non-poaching (e.g. employees)
Non-unfair competitive conduct
Confidentiality undertakings

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Making contractual terms stick…in Czech Republic and Slovak Republic

In assessing the reasonableness of a restraint the courts will

consider the extent of the activities being restrained, the geographic area and the time period during which the restraint

perates
Other assessing factors taken into account arise from the

circumstances at the time the contract was entered into, the nature of the business and clientele, the employee’s position and responsibility and relationship with customers, his/her salary and

ther remuneration and any amounts paid for the restraint
Limiting the scope of the restrictions will maximise chances of

enforceability

Use of cascading restraints by employers
Use of a restraint payment clause

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Other protections – Czech and Slovak Republic

Notice of termination – the use of extended notice periods in

employment agreements

Garden leave (work obstacles) – the use of garden leave

provisions to protect the employer while the employee is still employed

Liability of employees for damages
Criminal liability of employees for unfair competitive conduct

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Other legal options – Czech and Slovak Republic

Law of confidential information – based on:
Contract - express contractual provision
Law – Commercial Code, Personal Data

Protection Act

Intellectual property:
ownership by agreement or law
if in the course of employment, employer
wns
Remuneration strategies:
discretionary payments
deferred payments
retention bonuses
other options
roll over
shares/options
Author´s remuneration rights

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Poland

Unfair Competition Act – statutory protections
Labour Code and court rulings
Agreements with employees
What can you protect and when think of protections?
Recognised protected interests include:
Protection of confidential information
Protection of customer relationships and of stable workforce
Common types of restraint:
Non-compete (i.e. cannot work in the industry)
Non-solicit (e.g. customers)
Non-poaching (e.g. employees)
Non-unfair competitive conduct
Confidentiality undertakings

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Making contractual terms stick…. in Poland

In assessing the enforceability of a restraint the courts will

consider the extent of the activities being restrained, the geographic area and the time period during which the restraint

perates
Other assessing factors taken into account arise from the

circumstances at the time the contract was entered into, the nature of the business and clientele, the employee’s position and responsibility and relationship with customers, his/her salary and

ther remuneration and any amounts paid for the restraint
Detailed and clearly understandable scope of the restrictions will

maximise chances of enforceability

Use of a restraint payment clause – obligatory, statutory

miniumum applies

Defining term of restraint
Secure flexibility - termination clauses

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Other protections - Poland

Notice of termination – the use of extended notice periods in

employment agreements

Garden leave – the use of garden leave provisions to protect the

employer while the employee is still employed

Contractual liability (contractual damages, return of received

payments)

Liability of employees for damages
Civil and criminal liability of employees for unfair competitive

conduct

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Other legal options - Poland

Protection of confidential information – based on:
Contract - express contractual provision
Law – Labour Code, Unfair Competition Act, Criminal Code
Intellectual property:
ownership by agreement or law
if in the course of employment, employer owns
Remuneration strategies:
obligatory payments under non-compete
no payments under statutory unfair competition protections

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Practical steps and strategies

So an employee has resigned. What do we do? Step One Consider contractual arangements and access to information and whether you wish to cancel the non-compete (if any) or to renegotiate Step Two Remind employee of restraints and obligations Step Three Conduct surveillance and monitor breaches Step Four Consider remedies in the event of breach

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Evidence gathering

IT investigations (direct or indirect) – limited options only
In-house investigations vs forensic IT expert
Sources of information include
Work emails (including backups for deleted emails)
Internet access
Deleted files
Link files
Windows registry records for USB key/portable hard drive

use

Other sources
Work mobile telephone records
An informant: persuading a departing employee to stay
Clients
Evidence gathering
Impact of social media

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Available remedies – Czech and Slovak Republic

Remedies in the event of breach:
Undertakings
Interlocutory injunctions to enforce restraints

(in case of unfair competitive conduct)

Breach of contract
Breach of fiduciary duties and other equitable

claims

Damages / account of profits (review loss and

damage)

Contractual penalties
Criminal complaint

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Available remedies - Poland

Remedies in the event of breach by the employee:

Claim damages
Stop making the compensation payments (as of the date

the employer learns of the breach of the agreement)

Demand that the compensation paid be returned – on the

basis of unjustified enrichment legislation – if the employer has already paid the full amount of compensation due

Demand that the employee cease the competitive activity
Terminate new contract
Contractual and statutory remedies for breach of contract

(e.g. contractual damages)

Interlocutory injunctions to enforce restraints (in case of

unfair competitive conduct)

Criminal complaint

Breach

f

the employer’s

bligations

– failure to pay the compensation, failure to pay on time – consequences.

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Summary of practical tips

Restraints (‘enforceable ones’) – identify the

legitimate interest to be protected

Gardening leave and notice provisions
Confidential information and intellectual

property

Strong breach letters and undertakings
Gather evidence and investigate
Take any necessary legal action

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Contact Details

Małgorzata Grzelak Partner Warsaw, Poland małgorzata.grzelak@squiresanders.com T: +48 22 395 5528 Karin Konstantinovova Partner Prague, Czech Republic karin.konstantinovova@squiresanders.com T: +420 221 662 261

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Disclaimer

The information contained in this presentation is for general

information purposes only and should not be construed as giving the ground for any action or omission in connection with the above material.

This presentation should not be construed as professional

advice on legal or any other matters.

The examples given in this presentation are described with a

level of detail that does not provide for their implementation without additional comprehensive review with due regard to specific relevant facts and circumstances.

The application of laws and statutes may vary depending on

particular circumstances.

Squire Sanders does not assume liability for any damage that

may be caused to anyone as a result of any action (or omission)

n the basis of the information contained herein.

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39 Offices in 19 Countries