Leaving a job and setting up a competing business in direct competition to your business is extremely high risk for the now ex-employees and for you, their employer.
The first thing to do is to look at their contract of employment. If it contains restricted covenants that actually prevent an employee from setting up a business in direct competition when they leave the company, they could be in breach of contract. There could also be restrictions prohibiting moving and working with another individual that they worked with at a previous employer, especially if the individuals are considered influential.
Obligations may not solely be listed in an employment contract, but may also be found in service, shareholders, or partnership agreements, so it is important to review any document that might protect your business. Alongside this, it would also be important to truly understand the nature of the new business and any potential ramifications on the company and seek HR or legal advice if necessary, as to whether the covenants can be enforced and what action could be considered.
If you do have restrictive covenants in place, then it’s important that you confirm in writing to the resigning employees what their obligations are to you as their former employer and make it clear that you will pursue this legally if they are found to be in breach of any of the restrictive covenants in place.
As they are setting up a business in competition with you, you may also not want them to work out their notice period and could therefore place them on garden leave and prevent them form working on the business during this period or terminate their employment if they are found to be working on their business.
If no restrictive covenants apply, or you are happy with the employees leaving to establish another company, you could look to mutually agree an appropriate termination date which may be shorter than their contractual notice of employment.
