Company fails to prevent competition from former employees
A pharmaceutical company has failed to prevent two former employees setting up their own firm and competing for business from one of its main customers, the NHS.
The issue arose when the company considered selling adrenaline pens but then decided not to go ahead. Two of its employees thought there was a market for the pens and resigned to set up their own business.
They were then successful in getting orders for the pens from the NHS.
The pharmaceutical company took action against them, claiming they were breaking the terms of their contracts by setting up a rival company in competition for the same customer.
The court ruled that the former employees were not in breach of their contracts, as their new company was selling a different product to those offered by their previous employer.
The stipulation in the contract stated that employees could not compete with company interests in "business”.
In this case, the pharmaceutical company was not in the “business” of selling adrenaline pens, so there was no breach in the contract.
To consider the “business” to refer to pharmaceutical products of any kind, would be too broad and therefore unenforceable.