Be armed with contractual provisions in order to protect business interests when losing employees to competitors
Putting the right provisions in employment contracts can protect an employer’s interests when departing staff poach their business, as the Court of Appeal confirmed in Symbian Ltd v Christensen.
Christensen was a senior sales executive for a company developing software for a new generation of mobile phones. He accepted an offer of employment with competitor Microsoft, and resigned from Symbian’s employment without giving the contractual notice. Symbian reacted by invoking a garden leave provision in his contract. It then went to court for an injunction.
The court granted an injunction to prevent Christensen from working for Microsoft for six months, that being the period of notice he should have given. It noted that Christensen was expressly prohibited in his contract from working for any other business during his employment and that this provision continued to bind him, even though he was on garden leave.
Be prepared
The decision shows how useful it is for an employer to have different weapons in its contractual armoury when it seeks to protect its business against unfair competition from former employees.
Expert legal help should be sought, however, in drawing up terms to ensure they go no further than is necessary to protect the firm’s legitimate business interest. Otherwise, the clause could be entirely unenforceable.
The court decided in the Symbian case that Christensen’s non-competition covenants, which could apply if he were put on garden leave or on termination, were not wide enough to adequately protect Symbian.
In Symbian’s case, the effective weapon was the combination of a garden leave provision and an express clause preventing Christensen from working for any third party while in employment. Garden leave provisions should be carefully drawn so the employer has the option of implementing them for only part of the notice period, rather than all of it, and can give the employee special tasks to do if it wishes.
The express provision against working for a third party while in employment was key in the Symbian case because the High Court controversially decided that invoking a garden leave provision prevent an employer from relying on the implied duties of good faith and fidelity, which normally prevents an employee from working for a competitor during his employment.
Covering clause
The High Court’s stance is consistent with the Court of Appeal’s 1997 decision in Hutchings v Coinseed Ltd when it held that an employee who went to work for a competitor during her garden leave period was not necessarily in breach of any implied duties. It would, therefore, seem sensible to always include an express clause against competing during the term of the employment, in case it becomes necessary to put the employee on garden leave.
By Jill Kelly, a partner at Tunbridge Wells law firm Thomson, Snell & Passmore
Key points
- It is possible, in practice, to stop ex-employees competing.
- To have more chance of doing so, make sure the contract is well drafted.
- Include post termination restraints and a garden leave provision.
- It is safest to include an express prohibition on working for competitors during employment.
Comments are closed.