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Employer fails to stop key staff working for rival business

Posted: 9th January 2020   In: Business Employment, Individual Employment

An employer has failed to get an injunction restraining six key employees from working for a competitor, pending a trial to decide whether they were bound by a non-compete covenant.

The case involved recruitment company Affinity Workforce Solutions Ltd. In May 2019, it dismissed one of the employees for alleged gross misconduct. She challenged the decision and took up employment with a competitor.

Over the next few weeks, five other employees also resigned and joined the competitor. Affinity complained that they were breaching their duties of confidence. It sought undertakings that they would not solicit or deal with clients with whom they had dealt while working for Affinity.

After extensive correspondence between July and September, lists of clients were agreed for each employee. However, Affinity then changed its stance and issued a claim that the employees were bound by non-compete covenants in their employment contracts that prevented them working for the competitor for six months.

It applied for an interim injunction preventing the employees working for the competitor until the issue could be determined at full trial.

The court accepted that there was a serious issue to be tried but it was appropriate to note that Affinity’s case against the first and third employees was subject to substantial problems, and its case against the second and fourth employees was not straightforward.

The employees contended that they had no guarantee that they would continue to be employed by the competitor if they were unable to work for it, that a significant amount of their income was based on commission, and that they would suffer psychological harm if they lost their jobs.

In all the circumstances, damages would not be an adequate remedy for either side.

The court had to consider that for a significant period after it knew the employees were working for the competitor, Affinity had pursued a remedy via employee undertakings that they would not solicit or deal with its clients.

It had not asserted that it was necessary to enforce the alleged non-compete covenants until later.

Moreover, in agreeing those lists of clients, Affinity must have accepted that it was possible to identify the contacts and relationships that it contended amounted to its property for the purposes of protecting its legitimate business interests.

Further, it must have accepted that the employees could be relied on to honour the contractual undertakings that they were prepared to give.

Those protections had to be set against the obvious hardship to the employees of putting their continued employment with the competitor at risk by granting an injunction after they had initially been permitted to establish a new position and new business relationships there.

In those circumstances, even if the non-compete covenants were established, the court might decide that it was unreasonable and unjust to enforce them by a general injunction rather than the more targeted undertakings offered by the employees.

Accordingly, the balance of convenience was clearly against granting the injunction.
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[2019] EWHC 2829 (Ch)
Ch D (Snowden J) 24/10/2019
Posted by: Jackie Cuneen
Luton Office