Interim relief refused in non-competition injunction case
Employees sometimes have clauses in their contracts of employment which, on termination of employment, limit their ability to work in competition with their ex-employer (so-called ‘non-competition covenants’). These clauses are often put in place to protect confidential information which the employee might be leaving with and which may be valuable to a competitor.
Non-competition provisions operate in restraint of trade so will only be enforced by the courts insofar as they go no further than is reasonably necessary to protect the ex-employer’s legitimate business interests. If an employee acts in breach of a non-competition covenant then their ex-employer can apply to the High Court for interim injunctive relief – asking the court to enforce the covenant for the present time whilst a trial on the bigger argument of whether the clause is enforceable and binding on the employee is prepared and heard. The court will consider the following factors in deciding whether or not to grant an injunction:
- Whether there is a serious issue to be tried.
- Whether damages would be an adequate remedy.
- What would be the balance of convenience of each of the parties should an order be granted?
- Whether there are any special factors.
In the recent case of Jump Trading International Limited v Couture the High Court applied this test to a non-competition covenant. Mr Couture had handed in his resignation and spent 12 months on garden leave. During his garden leave period he informed his employer that he was going to work for a competitor. He explained that he did not believe that a non-competition provision in his contract of employment was enforceable as it was attempting to restrict him for a further 12 months when he would have already spent 12 months on garden leave. His employer waited until his garden leave period had finished and Mr Couture had started work for the competitor and then brought proceedings for interim injunctive relief against both Mr Couture and his new employer. The High Court decided not to grant interim belief. They found that there was a serious issue to be tried but the employer’s unreasonable delay in bringing proceedings meant that an interim injunction should be refused.
This case is a reminder that employers should act without delay as soon as they become aware of an employee’s intention to act in breach of covenant. The case is also interesting for the outcome in relation to Mr Couture’s new employer. It is usual for claims to be brought not just against the ex-employee for breach of contract but also against their new employer for inducing the breach of contract. In this case the High Court found that Mr Couture’s new employer had not induced any breach of contract as, prior to offering Mr Couture the job, it had received its own legal advice that the non-competition provision was not enforceable.
Adrian Fryer, Partner & Head of Employment
t: 0151 224 0539