In a recent interlocutory decision, the Federal Court granted a temporary non-solicitation restraint despite the employment contract being restraint free.
APT Technology, an engineering consultancy company, was quick to act when it discovered that one of its employees had set up a competing business and was stealing confidential information in the process. After sacking the bloke, APT commenced proceedings to stop him and his company from using the stolen info.
However, APT did not stop there. Not discouraged by the fact that the former employee’s employment contract did not contain a restraint of trade clause, APT pressed forward, seeking to stop the former employee from soliciting its clients.
While it has yet to reach final hearing, at the interlocutory application, the Federal Court said that the evidence suggested that the former employee was up to some pretty dodgy things including actively deceiving APT during his employment by courting its clients to his competing business.
The Court found that the former employee used his position at APT and its confidential information to give his business a head-start, including by securing the business of APT’s existing and former clients to APT’s detriment (often referred to as the ‘springboard principle’). As a result, although APT had no contractual post-employment restraint in its favour, the Federal Court restrained the former employee and his business from soliciting any of APT’s clients until the final hearing.
Although a great decision for APT and other employers in similar situations, life would have been much easier if the former employee was subject to a reasonable contractual restraint of trade. Accordingly, employers still need to make sure that their employment contracts properly protect their business interests, including through reasonable post-employment restraints. The Federal Court would likely have been much more hesitant to restrain APT’s former employee if it were not for his demonstrable shady dealings.