FinTech – keeping your best people and your best secrets
People and information are central to the success of any business and their value has rarely been greater than in the UK’s thriving fintech sector. Getting into the right habits now as regards your employment documents, will pay dividends down the line. Key areas include:
Confidential information: Your business’s confidential information and trade secrets are its property. As with any other property, to protect it you need to be able to identify it – only then can you really expect employees with access to it, to know that it’s confidential; that it’s yours; and that they must not copy, remove or otherwise misuse it.
So, your employment contracts should include a clear and comprehensive definition of your confidential information; then set out what is and what is not a legitimate use of that information, both during employment and after departure.
Prevention is better than cure. But if you suspect that someone has walked off with your confidential information or is about to misuse it, a range of remedies are available: some prohibit its use; others require its return or delivery up; and some open the door to financial damages.
Intellectual Property: Generally, a business will own rights in materials and inventions produced during the course of an employee’s employment. But this is not a given; particularly if an individual’s working arrangements are flexible and they often work remotely or during non-standard hours, it is crucial to have clear and widely drafted IP provisions – and if relevant, to spell out the particular kinds of materials that will be covered. In the event of any dispute, the terms of your contract can be decisive.
Pay: Employers are becoming increasingly imaginative and flexible in how they pay their staff.
Commission will be appealing if growth relies on sales in a competitive market. But commission schemes must be carefully written: while hurdles and thresholds are legitimate, ‘commission only’ arrangements will often fall foul of national minimum wage rules; and commission that is linked to an employee’s duties must be factored into their holiday pay calculations.
Often, the greatest incentive will be to offer some ‘skin in the game’. But be careful not to over-promise – claims often arise from a ‘promise’ made on recruitment that is never fulfilled. What’s more, if equity is shared between individuals going into business together, it’s essential to get the paperwork right including, a robust shareholders’ agreement.
Workplace monitoring and personal devices: Regular use of personal devices is becoming the norm and allowing staff to use their own devices for work brings many benefits – not least flexibility and convenience. But if you embrace the benefits, you should also think carefully about the potential pit-falls – including whether and how you can monitor content and traffic, how you will enforce security and protect proprietary information and how you will extract and retain information when someone leaves. A strong ‘Bring Your Own Device’ (‘BYOD’) policy is therefore a must.
What’s more, whilst it can be legitimate to monitor employees’ email content & traffic and internet usage, employees are still entitled to expect a certain degree of privacy. You must tell them if you plan on monitoring their activities and must explain why.
This is all the more relevant if your business model anticipates relationships with regulated entities; financial services regulation has never been hotter nor expectations higher as regards standards of information and data security.
Social media: Many employees consider their social media use to be personal. But the line is blurred and damage can be hard to undo. So, businesses should adopt a policy that draws some clear lines; that discourages misuse of company information and guards against damaging comments; and that encourages a coherent and positive external presence.
Termination: Most employees move on at some stage. You will want to know that when they do, they can’t simply plug your most valuable contacts and ideas straight into your competitor’s business.
Notice provisions sound simple but if poorly drafted, can be open to abuse. If a key employee walks out (whether or not in breach of his contractual notice period) you may not be able to force him to stay at work – but if your contract is well drafted and if you act swiftly, you should be able to keep him out of the market for a period of ‘garden leave’; and if he has acted badly, you may even be able to do so without pay.
Post-termination protection: Restrictive covenants are an essential tool in protecting your business and your best secrets. If drafted well, you can restrain departing employees from poaching staff, poaching or dealing with clients and contacts, using confidential information or, in some circumstances, working for a competitor.
But, the devil is in the detail. Blanket or generic provisions are often hopeless and if you try to cast the net too wide a Court may simply refuse to uphold your restrictions. Restrictions will also be read literally and the Courts will not help you if the language of the clause you rely on, doesn’t quite cover what you had hoped.
So, drafting mistakes can be costly – not least because others who signed the same contract will be watching with interest as the legitimacy of your contractual protection crumbles.
As with confidential information, whoever drafts your employment contracts must understand your business, what you want to protect and why; appropriate and sensible restrictions can then be tailored to your circumstances and will be far more effective – both as a deterrent and if you ever need to ask a Court to enforce them.
If a sale or any form of external investment is part of your strategy, all of these issues take on added relevance. Just as you will want to keep your best people and your best secrets close, any would-be investor will also want to know that their investment will be safe from the same threats; and it’s an awful lot simpler to put the right things in place now, than it will be to overhaul them once your business has grown up with bad habits.
Andrew Yule is an employment lawyer and Partner at Winckworth Sherwood LLP
firstname.lastname@example.org / 020 7593 5089