Enforcing Restrictive Covenants
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Confidentiality is a crucial consideration for most employers. Trying to stay competitive in the modern market can be challenging. Employers are now attempting to protect themselves by using post-termination restrictions in contracts of employment, to stop former employees taking confidential information to a competitor. In most cases, post-termination restrictions will be enough to stop an individual, but what happens when they disregard their contractual obligations and breach the restrictive covenants?
Before taking any decisive action, employers should attempt to contact an employee informally, and request a written undertaking that they will abide by the restrictive covenants in their contract. If this does not work, then it may be worth considering seeking an injunction.
Obtaining an injunction can be a useful tool to combat any breaches of restrictive covenants.
An injunction is a court order that can be used to compel an individual to either do or not do something. If there is an immediate risk that a restrictive covenant might be breached, then an interim (temporary) injunction might be appropriate.
Serious Risk Of Damage To The Business
For the Court to grant the injunction, you must be able to persuade them that there is a serious risk of damage to the business and this is a serious issue that must be tried.
You must also show that damages would not be a sufficient remedy, and it must be just and convenient for the court to grant the injunction, taking into consideration any harm granting the injunction could cause.
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The Case Law on post-termination restrictions
If the court grants an interim injunction, and the employee breaches this injunction, then they will be found to be in contempt of court, facing a hefty fine, or in serious cases, imprisonment, as demonstrated in OCS Group UK v Dadi.
In this case, Mr Dadi had breached his contract of employment by sending confidential information to his personal email address.
He was given an interim injunction. He was then served with an order that prevented him from sharing the information with third parties or destroying it. Mr Dadi was warned prior that breaching the order could lead to a fine or a prison sentence.
Mr Dadi deleted around 8,000 emails, as well as informing his manager about the injunction. He admitted to breaching the order. Although he expressed regret for his actions, the presiding judge gave Mr Dadi a six-week prison sentence to act as a deterrent to others who may attempt to breach a court order.
However, in contrast to this, in the case of NIIT Technologies v Mr Chaturvedi, the High Court refused to grant NIIT an injunction against Mr Chaturvedi.
Mr Chaturvedi left NIIT to go and work for a competitor. At the time, NIIT did not attempt to enforce any of the non-compete clauses in his contract, despite being fully aware of who Mr Chaturvedi’s new employer was.
Three months later, another NIIT employee left and joined Mr Chaturvedi at the competitor, and NIIT sought to enforce the non-solicitation and non-employment clauses in his contract, by seeking an interim injunction.
The High Court refused to grant the injunction due to the fact there was not enough evidence to suggest Mr Chaturvedi had poached the employee, and it could not simply be assumed due to the timing of the employee’s resignation.
These cases prove that interim injunctions can be a useful tool to prevent former employees from taking information or poaching clients, they must be used expertly.
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Note to employers
Employers and business owners should ensure that any restrictive covenants are clearly drafted by seeking specialist legal advice.
If it is decided that an injunction is necessary, then they should ensure that they have enough evidence to support their application.
About the author
James is on the Business Development & Account Management team at Neathouse Partners and regularly posts articles surrounding issues in HR & Employment Law, including case law & legislation updates. If you have a particular issue you would like addressed, feel free to drop James an email, and he will be happy to offer his assistance.
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