Restrictive covenants and team moves: three key employee competition cases in 2019
08 January 2020
A significant threat to any business is the risk of employees leaving to set up in competition and misusing confidential information or trade secrets in doing so. We look back at three of the most significant employee competition decisions of 2019 in this constantly evolving area of law.
1. Restrictive covenants: Tillman v Egon Zehnder
This case focussed on the question of severance in the context of a non-compete covenant in a contract of employment.
The Supreme Court ruled that although the six-month restriction went too far in restraining an employee from holding even a minority shareholding in a competing business, the remaining part of the clause could be saved by severance and enforced by the employer. However, the Supreme Court emphasised that courts will continue to adopt a cautious approach to post-termination restrictions.
Our article “unreasonable non-compete clause could be saved by severance” analyses the Supreme Court’s decision and its implications in more detail.
2. Springboard injunctions: Forse & Ors v Secarma Ltd & Ors
The Court of Appeal upheld the High Court’s decision to grant Secarma a ‘springboard injunction’ to neutralise the unfair advantage gained by a group of employees involved in an unlawful team move to a new business.
The injunction prevented the individuals from poaching further Secarma employees, providing services in competition with Secarma and engaging with certain clients. The Court of Appeal’s decision confirms that this protection may be available even in the absence of post-termination restrictions in the relevant employment contracts.
This is a leading authority on springboard relief. Lewis Silkin acted for Secarma and you can read our analysis of the implications of this decision in our article, “Court of Appeal maintains interim springboard injunction in team moves case”.
3. Team moves: Alesco Risk Management Services and ors v Bishopsgate Insurance Brokers Limited and ors
Lewis Silkin successfully defended High Court proceedings on behalf of a number of insurance firms in one of the most high profile team move cases in recent years. In a lengthy judgment, the High Court dismissed claims that our clients had conspired to unlawfully poach a team of brokers from a rival. The High Court made clear that it was possible to recruit a number of individuals from a competitor lawfully.
The decision underlines that “a case turns on evidence, not suspicions.” Claims for conspiracy require clear pleadings and compelling evidence to succeed; mere inference will not be enough. The case also serves to remind employers of the considerable potential cost implications of bringing allegations of employee competition that cannot ultimately be substantiated. The defendants in this litigation were awarded £3.1 million in costs.
You can read the full judgment here.
You can keep up with all our insights on the latest developments in contentious employment matters (including employee competition, protection of confidential information and privilege) through our employment litigation webpage.