Two recent cases heard by the High Court and Court of Appeal provide a spotlight on the importance of injunctions in employment law.
Whilst many claims in the field of employment law are brought by employees against their employer in the Employment Tribunal, regular claims made by employers against employees involve the enforcement of post termination restrictive covenants and the unauthorised taking of confidential data in the High Court. The nature of the claims usually leads to the employer seeking an injunction ordering the (usually former) employee to do, or refrain from doing, some particular act or acts.
In respect of post termination restrictive covenants, the former employer will usually be seeking an injunction which prevents the former employee joining a competitor or from soliciting business from former customers. Where confidential data has been taken from an employer, the usual injunction sought is to prevent the use of such confidential information and the delivery up of all copies (or as may be more appropriate in modern times, the deletion of copies held electronically).
Consequences of breaching an injunction
In OCS Group UK Ltd –v- Dadi and others the High Court heard an application by OCS for an injunction against their employee, Mr Dadi, who was accused of sending confidential data belonging to OCS to his personal email account. It was further alleged that Mr Dadi had conspired to take the confidential data with another individual who worked for a competitor.
OCS was successful in obtaining an injunction which, amongst other directions, ordered Mr Dadi to preserve hard copy and electronic documents pending a further court hearing and not to disclose the existence of the injunction. The injunction provided the usual penal notice explaining that a failure to comply with the court’s order would be a contempt of court and may result in imprisonment.
After receiving the injunction, and despite the warning of contempt of court, Mr Dadi proceeded to delete large volumes of emails from his personal email account and contacted his alleged co-conspirator and other members of his family to tell them of the injunction.
OCS applied for Mr Dadi to be committed to prison for contempt of court. Finding that Mr Dadi had deliberately breached the injunction, the High Court sentenced Mr Dadi to six weeks in prison for contempt of court.
The case is a strong reminder that injunctions must be complied with and that those involved in injunctive proceedings should take legal advice immediately to avoid inadvertent breaches which may carry significant consequences.
Problems with broad post termination restrictions
The High Court recently considered the enforceability of a “non compete” restriction contained in the employment contract of a senior executive involved in the provision of professional services for a global company, Egon Zehnder Ltd (“Egon”).
Egon were successful in obtaining an interim injunction to prevent the executive from joining a competing business on leaving Egon. The interim injunction was granted on the basis of the following clause in the employment contract:
13.2 You shall not ....... directly or indirectly .......... within the period of six months from the Termination Date:
13.2.3 directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company or any Group Company which were carried on at the Termination Date or during the period of twelve months prior to that date and with which you were materially concerned during such period
The restriction itself appears reasonable (and it was initially considered to be so such that the interim injunction was granted) but on further inspection following the employee’s appeal to the Court of Appeal, the restriction was found to be too wide.
The Court of Appeal found the restriction to be too wide on the basis that the words “engage or be concerned or interested in” would prevent the employee from having a minor interest in a competing business by way of an investment.
The extent to which the Court of Appeal found the restriction too wide was somewhat limited. The principle of restricting the employee from working for a competitor was not in doubt, it was the extent to which the employee was restricted more generally which caused the restriction to be found to be void. An exclusion for minor shareholdings (typically limited to 5%) in competing businesses may well have saved the restriction (and would usually be found in modern, professionally drafted restrictions). Employers dealing with restrictive covenants may well be aware of the difficulty with the enforcement of such provisions but this case provides another lesson in ensuring that restrictions go no further than required to protect a legitimate business interest.