Unfair Competition by Former Employees – The Law Can Move Fast!

February 16, 2018

Unfair Competition by Former Employees – The Law Can Move Fast!

If key workers leave your employment and you are concerned that they may breach their contracts by setting up in competition, the law can move fast to protect you. That was certainly so in one case in which four former employees of a fashion company were accused of plotting its downfall (Visage Limited and Another v Mehan and Others).

The four were all members of a family that had founded the company before selling its shares for £170 million. They had all stayed on as well-paid employees of the company but had since resigned, one of them still being on garden leave. Each of their employment contracts contained restrictive covenants which, amongst other things, protected the company's confidential information and forbade them from working for competitors whilst still employed by the company and for periods thereafter.

After the company launched proceedings against them, the High Court found that it had a powerful case that they had taken steps to build up a competing business whilst still in the company's employ. There was also a strong case that they had made use of their connections with the company's customers, suppliers and staff, and of its confidential information, to progress and secure orders for their new venture.

The four argued that the covenants were an unlawful restraint of trade, and thus unenforceable, but the Court found that the company had raised serious issues to be tried. The balance of convenience lay in favour of issuing an injunction against the four, holding them to the terms of the covenants, pending a speedy trial of the action.

The Court also granted an order for 'springboard relief', designed to prevent the four exploiting their alleged unlawful conduct by obtaining an unfair head start over the company for their new business.