How to protect your SME when an employee leaves

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It can be a tricky time when an employee leaves an organisation even in the most amicable situations. There can be a lot to arrange or rearrange to protect the business during the transition. The difference for an SME is principally that all these issues fall to the CEO, CFO, chief cook and bottle washer – in other words, you.  


Following is a quick checklist of the steps you should take to protect your SME when an employee leaves.


  1.  Know your responsibilities under the Fair Work Act and unfair dismissal laws.


Employers may not dismiss employees in circumstances that are harsh, unjust or unreasonable or for impermissible reasons, including age, race and gender. Employees should be given reasons for dismissal and an opportunity to respond to those reasons.


Employers with fewer than 15 employees are covered by special dismissal rules. Among these are:

  • employees must have worked for the business for 12 months in order to be eligible to make a claim for unfair dismissal, and
  • if a small business employer strictly follows the Small Business Fair Dismissal Code and the dismissal of their employee is not harsh, unjust or unreasonable, then it will be deemed to be fair.


You should also ensure that you provide employees with required notice and any annual leave that they have accrued.


  1.  When you hire, make sure that you that you have a comprehensive written employment agreement with the employee.  


This contract should explicitly spell out the employee’s obligation to protect confidential information and intellectual property.  These may include copyrights, designs and patents the employee may have had a role in developing. It would be wise to include a non-competition clause in the contract, as well. This should be formulated with and reviewed by legal counsel to ensure that it is enforceable and complies with the requirements of law.


  1.   Incentivise good employees to stay.


Is there any employee you would hate to lose, without whose knowledge and talents the business would surely suffer?  What exactly are you doing to keep him or her? Do superstars have the chance to grow in the business or must they leave?  Would it be appropriate, under the circumstances, to share an ownership interest in the business, even if that means a fundamental change in business structure?


  1.  During the course of employment, limit employees’ information access to only what is relevant to their job.

It is simply a matter of good information hygiene to limit access to sensitive or confidential information. This protects the business and may limit its exposure to legal action by other employees, as well.


  1.  Assess your SME’s cyber vulnerabilities.


Do you encourage employees to use their own electronic devices or to promote the business or products through their own social media contacts? The risks of such an approach may not be worth the potential rewards.


Make sure that your data systems are adequately protected with firewalls. Ensure remote access to all employee- owned devices, so that proprietary data can be secured or removed as soon as possible on termination. Make sure that the ownership rights to social media accounts are clear. This is another issue best handled at onboarding.


  1.  Plan the exit interview.


Every employee should have an exit interview, even if the parting of the ways is completely friendly.  When an employee is terminated, the employer should be prepared to calmly discuss and document the reasons. Some HR experts recommend scheduling it for the end of the workweek. Always have a third person present to act as a witness. Prepare and present the employee with an exit letter that sets out obligations under the employment agreement and their general law obligations.


The latter should include:

  • a duty of good faith, including a duty not to solicit customers of the business.
  • a duty not to use or disclose confidential information obtained by virtue of the working relationship, in any way which benefits the ex-employee or a third party.


Particularly if the interview is likely to be acrimonious, some experts recommend arranging to have passwords and access codes changed during the course of the meeting. In angry or otherwise difficult situations, the employee should not be allowed to re-enter the work space, but should be escorted out with personal belongings shipped home separately.


The attorneys at Owen Hodge Lawyers would be happy to help you plan an orderly process for handling employee departures, so that your SME is protected. Please call us at 1800 770 780 to schedule a consultation at your earliest convenience.


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