Recent news has highlighted how a number of high profile sports stars, including Kevin Pietersen and Roy Keane, have been restricted from talking frankly about the entirety of their careers. At its simplest this has been due to provisions in their employment contracts that prevent them from talking freely about matters that are not already in the public domain.
By way of example, if Roy Keane were to breach his confidentiality obligations by disclosing confidential information regarding an ex-employer in his autobiography and it could cause damage to reputation, then it is likely he will have to pay damages to that ex-employer. An injunction would seem to be a waste of time as once the information is in the public domain there would be little benefit in preventing Roy from talking about it again or further copies of the book from being sold. And of course there are significant downsides to an injunction, such as the cost and time spent in gaining one and an oppressive public image.
With a confidentiality clause that triggers a payment (or forfeit of something of similar value) then the traditional approach is for a court to consider whether the amount in the contract is a reasonable estimate of the damage that might be caused. If the amount is too great, aimed at discouraging breach rather than simply compensating, then it is a penalty and to that extent is unenforceable (seeLordsvale Finance plc v Bank of Zambia).
This test for this was recently reconsidered in El Makdessi v Cavendish Square Holdings BV, in which the court applied a “commercial justification” test rather than the traditional “genuine pre-estimate of loss” test. Applying this to Roy Keane’s case, a court is likely to consider how proportionate the amount is to a genuine pre-estimate of the loss to his ex-employer, but also whether there were commercial reasons that might justify a higher amount that a well-paid sports star might take more seriously.
Therefore the “commercial justification” test creates the potential for employers to have more effective and enforceable confidentiality provisions in their employment contracts so long as these are carefully tied to well-chosen commercial reasons.