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Will founding my own startup breach my employment contract?

It may sound obvious, but the first way to ensure you do not breach your existing contract is to have a thorough read through it.

You should look for any restrictive covenants or non-competition clauses: these will usually be framed as a prohibition on working for competitor companies, or within a defined geographical area for a certain time period after your employment ends.

You should also consider whether you are permitted to use confidential information, gained during your existing employment.

Restrictive Covenants

If your contract contains restrictive covenants that prohibit you from working in a similar industry, you should consider whether the covenants are valid.

Restrictive covenants must be reasonable in terms of both time and area, and must protect a legitimate business need.

If the clause in your contract is wider than is necessary to protect that information then it may be invalid. If the clause is reasonable and your proposed venture would breach its terms, you will need to seek advice from an Employment specialist.

Ownership of Intellectual Property

Anything you created, designed or developed ‘in the course of the business’ will (unless there is an agreement to the contrary) belong to your previous employer. This could be the case even if you carried out the work in your own time.

You should therefore be wary of using any designs, software code or documents created in the course of your previous employer’s business, as it is likely that doing so will breach their Intellectual Property Rights.

Use of your employer’s confidential information

You need to be careful not to use confidential information obtained during your previous employment. In addition to any express provisions in your contract, all employees owe an automatic implied duty not to knowingly misuse or wrongfully disclose their employer’s confidential information.

This information must amount to a trade secret, and not be mere confidential information (some examples include client databases or customer lists). If your employer finds out you have used trade secrets, it could seek an injunction or damages to restrain you from continuing to use the information.

If legal action is successfully taken against you, this may be expensive. In addition, it would likely be very detrimental to your reputation and new venture.

If you have any concerns about the above, you should speak to a specialist Employment lawyer who will be able to advise you further.

With contributions from Bethan Lloyd, Trainee Solicitor DLA Piper’s Tech & Sourcing team