What is a Cease and Desist Letter?

If you have a former worker who has done something detrimental to your business since leaving, they may be in breach of their previous contract. A cease and desist letter may be helpful in order to make that person discontinue their conduct. Typical examples of when you may have this type of letter prepared to protect your business include where the worker:

• breaches the contract generally;
• uses your business’ IP;
• discloses confidential information; or
• breaches restraint of trade or non-compete provisions.

This article will explore these different breaches and how a cease and desist letter may assist in these types of situations.

Breach of Contract 

There are numerous ways that someone can breach a contract, whether it is a:

• contractor agreement; 
• employment agreement; or 
• any other contract. 

Each contract has specific terms in place to protect your business. The breach may have serious repercussions for your business and cause significant damage. It may be desirable to let the breaching party know they are in breach and prevent them from continuing with the conduct that amounts to the breach.

Breach of Intellectual Property Obligations

Often employment agreements and contractor agreements contain clauses around intellectual property (IP) that is developed during employment or engagement with a worker. The clauses exist to:

• protect the IP of the business; and 
• ensure that the IP remains with the business once the employee or contractor leaves. 

If the employee were to carry on using the IP in their next role or to start their own business, a cease and desist letter may be useful to stop them using the IP. This becomes particularly relevant when your business still uses that IP and it is critical to your business.

Use of Confidential Information

Many contracts contain clauses around the protection of confidential information. The obligation to protect confidential information also exists at common law. Businesses often want to protect all confidential information workers gain whilst engaged. This may include information like:

• client lists;
• supplier lists; 
• pricing lists; or
• procedures and templates. 

If an ex-worker continues to use this information, it can have a detrimental effect on the business. 

Restraint of Trade 

Many employment agreements and contractor agreements contain restraint of trade or non-compete clauses. These clauses assist businesses with preventing employees or contractors from setting up their own competing business or soliciting existing clients or workers from your business.

There is often a restraint area and restraint period defined in the contract. This can be very important for your business, especially for more senior workers who have a lot of client contact and really understand your business. It could be quite detrimental if they set up a competing business nearby. A cease and desist letter could be helpful in terms or reminding them of their restraint obligations and to refrain them from setting up their own business.

What Is Typically Included in a Cease and Desist Letter?

In a cease and desist letter, you will usually start by alerting the person to the relevant breach. Next, you will direct them to cease and desist. Finally, you will put the person on notice and reserve your rights to commence formal proceedings. Sending a cease and desist letter is often the first step in legal action before commencing formal legal proceedings. It is a very important step, especially considering the very costly and timely process involved in litigation.

Key Takeaways

There are various situations where it may be useful for your business to send a cease and desist letter. This includes when a former worker is:

• breaching their contract; 
• using your business’ IP;
• disclosing confidential information; or
• breaching their restraint of trade provisions.

If you need help with determining the best strategy for your business and drafting the relevant letter, please contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.