Hong Kong law on the enforceability of confidentiality and non-compete clauses is very fact dependent and it is often difficult to ascertain the extent to which these provisions will be enforceable. In general, they are void on public policy grounds unless they are no wider than necessary to protect the legitimate interest of the company – which means the wider the restriction imposed, the less likely it is that the restriction will be enforceable.
During employment, an employee owes an implied duty of good faith to his employer, and hence it is legitimate to restrict use or disclosure of all confidential information gained during employment. However, once employment is terminated, any such restriction is prima facie void as being a restraint of trade. It is unenforceable unless the employer can justify it as being necessary to protect legitimate proprietary interest. Important and specific trade secrets, as distinguished from any information that is part of the skill, knowledge and experience gained by an employee as a result of his employment, can usually be protected by a suitably particularised express covenant.
A recent English High Court case suggests that mandatory injunctions may be available against ex-employees to destroy confidential information in their possession. The former employee worked at a global insurance broker, before joining another insurance broker. He disclosed one of his former employer's client lists to his new employer, who then used it to approach some 300 clients.
The former employer initially obtained an injunction granting their forensic IT experts access to the computer systems and devices of the defendants (the ex-employee and his new employer) to search for their confidential information. The former employer then sought a further order to delete any confidential information found. The Court granted the order, on the grounds that:
- the defendants knowingly misused the confidential information;
- the defendants could not be trusted to delete the confidential information themselves;
- compensation was an inadequate remedy; and
- any information subsequently found to have been wrongly removed could be restored.
By contrast, in Tung Ga Linen & Cotton Mills Ltd v Ng Ka Wai in 2014, the ex-employees of a Hong Kong fabric company had taken client information and fabric samples to divert business to a rival company. The Hong Kong Court of First Instance only granted a "delivery up" order over confidential information in the ex-employee's hands. As English cases are only persuasive authority and are not binding on Hong Kong Courts, we are yet to see whether the Hong Kong Courts will consider more severe forms of injunctive relief in future cases following the UK decision.
Non-compete clauses are restrictive covenants, which must extend no further than is reasonably necessary to protect the employer's legitimate interests. The Court will consider factors such as the employee's seniority, the period and geographical scope of restriction. For example, a longer non-compete restriction period (12 months, for example) will require justification by special circumstances and a restriction which applies only to a specific area like "Hong Kong" will more likely be enforceable than one which applies to a broader area such as "Asia".