Is it possible to ban a top Manager to work for a competitor?

Finding a talented Manager, the first thing you want to do the owner or shareholder is to prevent it from moving to competitors in return for the position. Many have heard about the Western practice of applying a so-called restrictive covenants, that is, the restrictive provisions in the contracts.

Most often, it is the conclusion of non-compete agreements — non-compete agreements by which the management of Western corporations, getting to the office, legitimately undertakes not to work for a competing business. Some are willing to repeat such practice in the Western part of Ukrainian companies, either by entering into such agreements, or including the necessary restrictions in labor contracts. But in the end, this is the first step in settling relations with a hired guide to be the first mistake in this process. Why is the prohibition to work for a competitor does not work in Ukraine?

Any senior Executive of the Ukrainian company — first and foremost, an employee. Going to work for competitors, it will also remain an employee, only from another employer. It already distinguishes our jurisdiction from other countries, where leadership is sometimes not available labor guarantees, and relations with the Corporation are not labor.

Consequently, a top Manager of the Ukrainian company, like all other workers, have a number of rights in the labor sphere, for example, actually right to work. According to the Constitution of Ukraine (article 43) this right includes the ability to earn a living by work which one freely chooses or which he freely agrees. If in General, so you can easily prove that the direct prohibition to work for any company that violates the constitutional right to freedom of choice of employment.

Why non-compete agreements work “out there”? First, it often happens that it is expressly provided and permitted by law of the respective countries. Secondly, (and most worryingly), “they” paid for it. That is, banning of SEO a few years to work for a competitor, the business all this time is obliged to pay a considerable compensation, for example, 50% of salary. Thirdly, such prohibitions should conform to the concept of reasonableness and cannot be absolute.

As a rule, limited to the scope of the ban (not to ban the individual to earn and grow in the sphere of its activity), its territory and term. In addition, these restrictions derive either from legislation or approaches to the assessment of their intelligence formulated by the courts. That is, “just ban” — can not be only to develop a good working noncompete for an individual situation that is quite complicated (and expensive) task.

The use of such practices by Ukrainian companies happens, first, in the absence of legislative approval for similar bans. Secondly, to refrain from working for a competitor, the top Manager needs free of charge, while on the criteria of reasonableness in the interests of such an employee and suckled his business basically no one does not think. These differences in the approaches of Ukraine and the Western countries, in turn, generate another key difference: non-compete agreements, which have been successfully applied in many foreign jurisdictions, in Ukraine simply does not work. Are there other protective mechanisms for business?

To find a suitable set of methods of protection of business interests is real important, timely and comprehensively to do it.

First and foremost, is to learn how to share the knowledge and skills of a top Manager and information belonging to the company. But defining the latter, it must be carefully and meticulously preserved. We are talking about the proper identification and protection of commercial secrets, personal data and other protected information that a business owns. Let’s start with the fact that the information needs to be classified as a trade secret in the early stage of its creation, and all persons having access to it, need to understand what this information is, and what the limits on its spread and use.

This can be done by introducing as well-designed and properly implementierung internal policies and by applying technological protection measures. When you receive a volume-Manager to work (and, especially, with his dismissal), appropriate confidentiality obligations must be secured in writing. Such measures may not be an absolute guarantee of protection of the business, but they are completely legitimate and absolutely free.

The second basic step is the correct and proper preparation of employment contracts and especially agreements on their termination. The Ukrainian legislation is very liberal in terms of written fixation of the agreed conditions, and to execute and to terminate a relationship even with SEO it is possible with a minimum of written documents. Of course, verbal agreements are sometimes rather multi-page documents, however, to register on paper the rights and duties is much safer than just to make a record in the work book.

Besides the already mentioned confidentiality provisions for the benefit of the interests of the company may serve as the points governing the compensation packages of top managers, especially of premium and, most of all, Golden parachutes. Because the risk of losing promised or received from the company money can be a powerful domestic obstacle to the potential transfer of know-how to competitors.

The variability of action for foreign companies who hire local top managers in Ukrainian offices, maybe even more. It is likely that the Manager will be able to apply the approaches of Western jurisdictions to limit competition, for example, in the case of legal relations with the parent company, or in the case of the ownership of Manager shares itself. In other words, when the individually-chosen and well-designed approach, the protection of business within the requirements of legality and rationality — quite feasible task.

Perhaps the Ukrainian legislative regulation do not always go up with time. However, in such conditions it is possible properly and successfully protect the interests of the business. The main thing — to treat the issue seriously and promptly resolve it.