Webinar Series: Confidentiality and Restrictive Covenants Around the Globe Poland, Czech Republic & Slovak Republic 16 May 2013 Małgorzata Grzelak Karin Konstantinovova 39 Offices in 19 Countries
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 2
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 3
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 operates • 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 other 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 4
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 5
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 owns • Remuneration strategies: discretionary payments deferred payments retention bonuses other options roll over shares/options Author ´ s remuneration rights 6
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 7
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 operates • 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 other 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 8
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 9
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 10
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 11
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 12
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 13
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 of the employer’s obligations – failure to pay the compensation, failure to pay on time – consequences. 14
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 15
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 16
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) on the basis of the information contained herein. 17
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Webinar Series: Confidentiality and Restrictive Covenants Around the Globe Poland, Czech Republic & Slovak Republic 16 May 2013 Małgorzata Grzelak Karin Konstantinovova 39 Offices in 19 Countries
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