The High Court has delivered its most recent ruling on restrictive covenants/restraint of trade clauses in employment contracts.* The Court granted an injunction restraining a former employee from breaching the duty of confidentiality as set out in her contract of employment.

The Court however refused to grant injunctive relief preventing the former employee from taking up employment with another competitor in the area. The Court did add that the employee concerned should not approach or deal with any existing clients of the plaintiff company for a period of twelve months. 

The plaintiff's business provided on-line marketing and technology services specifically for the hotel sector.  The first named defendant, Ms Conaghan, took up employment with the plaintiff in or around August 2009.  Her contract contained an express confidentiality clause together with a non-compete clause which prevented her from setting up, consulting or working for a business which provided similar services to that of the plaintiff for a twelve month period after her employment ended.

The plaintiff viewed the departure of Ms Conaghan as a serious threat to the future of its business.  The plaintiff had recently developed a particular social media tool for its business and this module was unique to the plaintiff company. As far as it was aware its competitors had not yet produced a similar type tool. The plaintiff also described Ms Conaghan as a key component in its business as she had been promoted to occupy the position of head of client development. The plaintiff was seriously concerned about the loss of a key person within its business and about the potential for loss of confidential information which might then be used for the benefit of the competitor company. 

On the confidentiality point, the Judge accepted that Ms Conaghan had information regarding specific clients of the plaintiff which was acquired by her during the course of her employment and which would likely be of benefit to a competitor of the plaintiff. In those circumstances the Judge felt it appropriate to grant injunctive relief preventing her from breaching her duty of confidentiality. The Judge said that an employer has a "legitimate interest in protecting its confidential information and customer connections built up or maintained."

In relation to the non-compete clause, the Court did not have any issue with the temporal limitation of twelve months.  The Court did however have a problem with the fact that the clause prohibited all competition and that there was no geographical limitation to it.  Practically it meant that if Ms Conaghan sought employment outside Ireland that she would be unable to take up any offer of employment in a business that was similar to the plaintiff's. The Court felt that this was far too wide to protect the legitimate requirements of the plaintiff's business. As a result the Court held that the non-compete clause was void and unenforceable. It did say however that the former employee should not approach, solicit or deal with clients of the plaintiff business for a period of twelve months.

Comment

The case provides a useful reminder of the circumstances in which restrictive covenants and confidentiality obligations may be enforced. The granting of the relief restraining the former employee from breaching her duty of confidentiality endorses the general view that enforcing confidentiality clauses is somewhat easier to achieve and may even be done where there is no written contractual restriction. Non compete clauses, on the other hand, have traditionally been viewed more suspiciously by the Courts. This may be because the Courts are aware of the need to achieve a balance between encouraging competition on the one hand and also acknowledging that an employer will want to safeguard the investment it has made to the employment relationship.

This recent decision however shows that the Courts are somewhat more willing to consider the range of circumstances in which the legitimate interests of the employer business may be protected. The upshot of this was that although the non compete clause was held to be unenforceable, the non solicitation restriction was upheld for a period of twelve months.

* Net Affinity v Conaghan and Ors  [2011] IEHC 160