Recent guidance on injunctions enforcing non-compete covenants
The recent case of Affinity Workforce Solutions Ltd v McCann & Ors, reinforces the importance of employers seeking comprehensive undertakings from former employees at the outset and shows that where an employer seeks to supplement agreed undertakings later, via injunctive relief, the Court may be unwilling to intervene.
Affinity is a recruitment services provider in the education sector who sought an injunction against five of its former employees (the Employees) and the Employees' new employer, Tradewind seeking to enforce the non-compete provisions of the Employees' employment contracts.
Following the Employees' departure, Affinity sought to protect its business by obtaining contractual undertakings from the Employees. Undertakings were subsequently agreed which prevented the Employees from soliciting or dealing with, for an initial period, specific lists of identified schools and candidates in respect of each individual Employee (the Agreed Lists). The undertakings agreed did not include (nor had Affinity ever sought) a non-compete provision, to prevent the Employees competing with Affinity by working for Tradewind.
Affinity indicated that, although it was prepared to accept the agreed undertakings, it would issue proceedings to enforce the non-compete provisions it claimed were included in the Employees' employment contracts. The First – Fifth Defendants disputed the validity of the non-compete provisions and as they had already commenced their employment with Tradewind, refused to give the requested non-compete undertakings.
Applying Thomas v Farr plc the Court agreed that in principle "a non-competition clause may be the most satisfactory form of restraint, provided that it is reasonable in space and time."
However, considering the facts of the particular case (and considering the well-established principles of American Cyanamid) the Court found that:
- Affinity had previously agreed undertakings on the basis of the Agreed Lists which Affinity must have believed could be effectively 'policed' and sufficiently protected its legitimate business interests without the need for a non-compete provision which was not sought.
- Affinity had been prepared, for a significant period of time, to accept that the agreed undertakings without a non-compete provision. Affinity did not provide satisfactory additional evidence which justified its change in stance.
- if the Employees were now required to provide a non-compete undertaking, their employment at Tradewind would be at risk which would cause obvious disruption to the lives of the Employees and practical difficulties to Tradewind's business.
- granting an interim injunction in general terms, would risk a substantial injustice to the Employees if such relief would not be granted at trial, whereas the risks of injustice facing Affinity, should the Court instead accept the non-solicitation and non-dealing undertakings, were far less.
- Affinity had delayed in preventing the Employees' employment with Tradewind for a significant period. The Court was reluctant to intervene where no clear evidence had been adduced by Affinity to show that non-compete was necessary to protect Affinity's business.
The Court therefore rejected the injunction sought and accepted the undertakings offered by the Employees.
This case demonstrates the care that needs to be taken at the outset when employers request undertakings required to protect their business.
- If an undertaking is initially sought, then seeking at a later date to increase its scope without good reason through an application for injunctive relief may be problematic.
- Where undertakings sought are precisely framed, for example by reference to customer lists or specific confidential information, the Courts are more likely to find these can be accurately 'policed' without a general non-compete prohibition.
- To increase the chances of successfully enforcing a non-compete provision, employers should not delay and make their application for an injunction prior to the former employee joining the competing business.
As is often the case in Business Protection cases, getting the right advice at an early stage is critical.
Addleshaw Goddard is recognised as the market-leading Business Protection Practice. Our team’s work focuses on advising organisations on team moves and helping employers to manage the risks stemming from employees and third parties who pose a threat to their legitimate interests, by taking action to enforce the employer’s rights and protect confidential information ranging from securing undertakings or obtaining injunctive relief, to pursuing claims for damages/loss of profits.
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