If you are concerned that a former employee is preparing to work for a competitor in breach of a restrictive covenant in their employment contract, enforcement of your rights may well depend on how quickly you consult a solicitor. The potential consequences of delay in doing so were underlined by a High Court ruling.
The case concerned a specialist researcher in algorithmic trading who worked for a global investment firm. After he resigned, giving one year’s notice, he was placed on garden leave. His contract included a non-compete clause that was designed to protect the firm’s confidential information, intellectual property rights, goodwill and business connections.
The clause forbade him from directly or indirectly engaging in competitive activity for a period after the end of his garden leave or notice period. Unusually, the length of that period was at the firm’s discretion. In the event, it elected for a period of 12 months, the maximum permitted under the contract.
After the firm learned of the man’s intention to take up a position with what it viewed as a competitor, it launched proceedings and sought an interim injunction preventing him from starting his new job shortly after the end of his garden leave. Resisting the application, the man argued, amongst other things, that the clause was unenforceable in that it was too widely drawn to be considered reasonable. The period during which he would be restrained from starting his new job – in effect, two years – was, he contended, too long.
Ruling on the matter, the Court formed a preliminary view that the man’s arguments had considerable force and were stronger than those of the firm. The latter, however, had raised serious issues to be tried which would ordinarily have justified the grant of an interim injunction to maintain the status quo pending trial.
In finding that it would be unjust to grant the order sought, however, the Court ruled that the firm’s unreasonable delay in launching proceedings was decisive. There was no explanation as to why it did nothing at all for almost four months after becoming aware of the man’s intended start date in his new job.
The delay would prejudice the man’s position, not least by causing further atrophy of his marketable skills. His new employer would also suffer in that it had already recruited other members of his prospective team. An opportunity for arbitration had also been lost. The Court directed a speedy trial of the firm’s underlying claim.