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Publisher fails to stop employee setting up rival business

Posted: 17th September 2013   In: Corporate Commercial

A publishing company has failed in its bid to stop a former employee hiring some of its staff and contacting its customers.

A court ruled that a restrictive covenant designed to prevent the employee setting up a rival business was too broad to be enforced.

The case involved a company that published free electronic magazines. Its income came from selling advertising space to suppliers of the companies featured in the articles.

A former employee set up a rival business and hired two senior members of the company’s staff. He had access to confidential information containing a list of potential customers and another list of business contacts.

However, he claimed to have got the information from another source.

The former employee’s new business directly competed with the company, both targeting the African business market.

The company applied for an interim injunction to stop the employee recruiting its senior staff, from dealing with its customers and from using its confidential information. It said the employee was in breach of restrictive covenants in a non-compete deed in his employment contract.

The employee said the deed was unenforceable because it stopped him being at a rival business in any capacity.

He also said that much of the information about suppliers had been given to him voluntarily by the same businesses that had given it to his former company.

The court held that the company’s non-compete deed was more than was reasonable to protect its interests and therefore could not be enforced. It tried to restrain the employee from being involved in a competing business in any capacity, even as a shareholder. This was too broad to be acceptable.

Please contact Sarah Liddiard if you would like more information about the issues raised in this article.