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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.
To find out how we can advise you on all matters relating to employment and commercial law, please complete the form below.
Quastels SRA Diversity Questionnaire 2023
Results for Quastels: Staff SRA Diversity Questionnaire 2023
79% of our staff completed the 2023 Solicitors Regulation Authority (SRA) Diversity questionnaire.
Response to the survey by individuals is encouraged yet voluntary. Staff also have the option to complete the survey whilst choosing not to respond to one or more of the questions.
Where the following data refers to ‘staff’, ‘all staff’ or ‘total staff’ this should be read as ‘all staff who responded to the survey and the question’.
Of those staff who completed the questionnaire, see the results below.
Role Categories
Age Categories Of Quastels Staff
What Is The Sex Of Quastels Staff?
Do The Staff At Quastels Identify With The Same Gender They Were Assigned At Birth?
The Equality Act
The Equality Act defines a disabled person as someone who has a mental or physical impairment that has a substantial and long-term adverse effect on the person’s ability to carry out normal day-to-day activities.
Do Quastels Staff Have Problems Or Disability Impacting Their Day-To-Day Activities?
Ethnic Identity Of Quastels Staff
What Are Religious Belief Of Quastels Staff?
Quastels Staff Sexual Orientation
What Type of School Did Quastels Employees Attend Between The Ages of 11 to 16?
Did Either Parent of Quastels Staff Gain a Degree Before Staff Were 18 Years Old?
What Was the Occupation of the Main Earner of a Quastels Employee When They Were 14 Years Old?
Find out more about Quastels core values and our Social Impact Programme for 2023.
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Making Minimum Energy Efficiency Standards Work for Your Commercial Property
Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI 2015/962) introduced Minimum Energy Efficiency Standards known as “MEES Regulations”.
Watch Mark Cornelius and Naomi Jones deliver a presentation on Energy Performance Certificates for commercial landlords attending the Handelsbanken Sustainability Event.
A landlord of sub-standard commercial property (with and rating of F or G) must not grant a new tenancy on or after 1 April 2018 or continue to let the property on or after 1 April 2023 unless one of the of the following apply:
- The landlord makes sufficient energy efficiency improvements to the property, so that it is no longer sub-standard.
- The landlord can claim a legitimate reason not to do so, and this has been validly registered on the Private Rented Sector Exemptions Register.
What Is Considered To Be Sub-Standard?
At present, if the property has a valid EPC rating of E or better, it is not sub-standard and the MEES Regulations will not apply. However it is anticipated that a property will be sub-standard if it has a rating of below a B by 2030.
Exemptions:
There are a number of exemptions which can be claimed such as:
- Consent – a tenant or third party, whose consent, permission or approval is needed for a proposed energy efficiency improvement, has refused that consent.
- Devaluation – within the last 5 years the landlord has obtained a report from an independent surveyor which states that making the relevant energy efficiency improvement would result in a reduction of more than 5% in the market value of the property, or of the building of which it forms part.
- Improvements exemption – the landlord has made all the relevant energy efficiency improvements to the property that can be made however the EPC rating is still below E.
- New landlord – where a new landlord purchases a sub-standard property it may be given six months to comply.
- Pay-back test – if the cost of improvements would not be recovered through energy savings within a seven-year period.
What Happens If A Lease Is Granted Or Continued In Breach Of The Mees Regulations?
A lease of sub-standard commercial property will still be valid and enforceable if, without compliance with the MEES Regulations it is:
- granted on or after 1 April 2018.
- continued, on or after 1 April 2023.
However, a breach could result in:
- Landlord being fined up to £150,000 per offence;
- A publication penalty -details of the breach are entered on the publicly accessible part of the Private Rented Sector Exemptions Register. This could result in negative publicity for the landlord and it may also act as a red flag to a prospective purchaser or tenant of the property.
How Does This Interact With EPC Regulations?
The guidelines suggest that an EPC is not required for a lease renewal as not classed as a sale or a rental.
Although clear from MEES Regulations that a landlord cannot continue to let the property where the EPC rating is F or lower, some ambiguity as to whether the landlord is required to actually required to commission a new EPC if there has been no valid EPC in the last 10 years. Could there be an option to postpone commissioning a new EPC where the property is currently let?
EPC guidance suggests the answer is yes however conflicts with MEES guidance which suggests that, if there is no valid EPC for a property, an EPC would be needed on reletting to the current tenant.
Keep an eye on whether this ambiguity is corrected in the future. For now may be safest to assume that a new EPC will be required.
Changes To Minimum Energy Efficiency Standards
The UK Energy White Paper 2020 published by the Government confirmed that the future course for minimum energy efficiency rating for commercial properties will be an EPC rating of B by 1 April 2030.
On 17 March 2021, the Government published a further consultation which proposed including an interim minimum rating for commercial properties of C by 2027.
Next Steps For Landlords
- Review their property portfolios and identify any sub-standard properties
- Assume a new EPC will be required even where current letting continuing
- Check whether any of the exemptions apply to sub-standard properties
- If required, carry out the necessary energy efficiency works
- Plan ahead in line with the anticipated changes to MEES
- Consider rights of access in leases to facilitate changes and obligations on tenants to contribute towards costs.
If you have any commercial real estate enquiries, please feel free to reach out to our team via the form below.
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