· 2 min read · Features

Open innovation and employment law


What legal issues could an increase in innovation beyond organisational boundaries throw up?

Open innovation is still quite an emerging area, but from an employment law and HR perspective, here is how things might develop, according to James Froud, a partner at law firm Bird & Bird.

1 Protecting ideas and business assets

Employees represent the key threat to businesses and their confidential information. Employers can implement a number of measures to minimise the risks and seek to prevent leaking and misuse of their intangible assets. At the most basic level this will mean ensuring:

  • Employment contracts contain appropriate and robust terms on both the use of confidential information and activities post-termination.
  • Policies on the use of IT and mobile devices establishing the rules and boundaries.
  • Access to sensitive information is limited to those who need to know.
  • Information can be tracked.

In the context of OI, these traditional approaches to protecting vital business assets will need to be re-evaluated since the very essence of OI is to allow the flow of information outside of the confines of an organisation. This does not mean that commercially sensitive information will be a free-for-all but employers will need to take greater care over how they define confidential information.

2 Monitoring and data protection

Given the possibilities for ‘information contamination’ (in OI projects) and the ‘wrong’ information being unwittingly (or wilfully) disseminated outside of an organisation, employers are likely to become increasingly keen to track the flow of information. This could lead to a greater emphasis on monitoring the activities of employees and their use of information.

3 Downsizing / restructuring / TUPE

It seems entirely likely the nature of OI could lead to restructuring exercises and possible redundancies. It is also worth noting that the flow of business assets, ideas and people between organisations and the creation of assets from joint OI ventures could lead to undertakings being transferred in accordance with the TUPE legislation. Employers will need to be vigilant to ensure they comply with the TUPE obligations.

4 Remuneration and incentives

The way in which employees are remunerated and incentivised will need to be considered in the OI context since ‘innovators’ may not be contributing to corporate assets in the traditional way. How will employers determine the value derived from a successful OI initiative, and the individual contributions to that success? If employers focus on OI, might it lead to a two-tier workforce?

5 Performance management

How will businesses assess and manage employee performance when an end product has more to do with the contribution of an external ‘partner’? Silos may be created and performance comparisons across groups could become more difficult. Where performance management becomes more challenging, there may be disgruntled employees seeking recompense.