In this section we describe an interesting recent case we have been involved in, explaining the issues involved, how we handled it highlighting points of legal and practical interest.
A competitor poaching a team of employees can cause considerable disruption to a business and its plans. We have recently acted for a company that was faced with precisely that situation. One of our client’s employees instigated, with a competitor, a coordinated attempt to take a team of employees (the Employee Defendants) from a part of our client’s business. All the Employee Defendants resigned on the same day, but did not tell our client that they were going to a competitor. During their notice periods, some of the Employee Defendants made various requests for confidential information from our client.
Our first step was to evaluate the quality of the available evidence (including a review of electronic documents (including company emails) found on the company computers used by the Employee Defendants) to ascertain the extent of the Employee Defendants’ wrongdoing.
Once we established the strength of the evidence against the Employee Defendants, we agreed a strategy with our client to have the maximum impact. We sought undertakings from the competitor and the Employee Defendants so our client was fully aware of how the dispute was going to play out and on the basis that if they were not provided that we would issue legal proceedings for interim injunctive relief, including the granting of a springboard injunction.
Whilst undoubtedly it is preferable for a client to have contractual restrictive covenants in their employees’ employment contracts, including noncompete, non-solicit, non-deal and nonpoach covenants, springboard relief presents an opportunity to prevent the new competitor and employee defendants from gaining a competitive advantage even in the absence of such restrictions. In this case, only one of the defendants had such covenants in their employment contract.
We applied for interim injunctions on behalf of our client, arguing that there had been an unlawful team move providing the competitor with an ‘ovenready’ team to launch a new office and to make use of our client’s confidential information. In such circumstances, a normal confidentiality injunction would not provide proper protection to our client, the former employer, because the confidential information has already been used, and would no longer be confidential. Springboard injunctions are designed to cancel out the unlawful advantage or head start that the employee(s) gain through misuse of the employer’s confidential information.
The competitor and Employee Defendants refused to provide the undertakings we sought and an application for interim injunctive relief was issued within a few days which was contested. In this case, we put forward two alternative forms of springboard relief:
- an order that the employee defendants must not be employed, engaged or involved in the same business of our client, or in any way assist any other defendant in such business
- an order against the Employee Defendants, in the form of one of the Employee Defendants’ contractual restrictive covenants, including non-compete, non-solicit, non-deal and non-poach covenants
The court found favour with (ii) and we successfully obtained an interim injunction against all defendants (competing company and Employee Defendants), which prevented the employees from soliciting and dealing with customers of our client. In respect of the competitor, we also obtained orders preventing it from inducing any breaches by the employee defendants’ contracts of employment with our client; and orders against all the defendants from misusing our client’s confidential information.
Having obtained the injunction, we used this to successfully obtain suitable undertakings from a second team of former employees who had also left to join the competitor’s business. The matter was listed for an expedited trial however, we were able to settle the claim on very favourable terms for our client.
The commercial benefits to our client were substantial:
- our client was able to curtail its competitor’s illegal activity, impacting on the competitor’s ability to ambush our client’s business, giving our client the opportunity to implement contingency plans
- a clear message was given to its employees that it will take steps to enforce its covenants
- our client was not significantly out of pocket as it recovered the majority of its legal costs from the competitor
We were in a position to assist our client quickly and effectively with this issue and our client has commercially benefitted greatly from this action.