Team Moves and Springboard Injunctions
Picture this, you are the Head of HR for a successful widget manufacturer. You’ve just concluded such an excellent financial year you could almost be forgiven for boasting to your peers that when it comes to widgets, Widget Co is “absolutely smashing it”. Which is why you were surprised when Belinda, your Head of Research & Development, suddenly announced her departure due to retirement (that and the fact she was only 39). Perhaps this was a career highlight for her, and she simply wanted to go out on a high? And when her deputy announced his departure to pursue a life-long ambition to become a grave-digger, well everyone has a dream, don’t they? Come to think of it, that third resignation from Bella was a bit questionable, who gave up her career to become a full-time carer for her cat? Now you’ve just received an email from a fourth team member, your heart plunges as you know, before you even open it, that it is going to contain another resignation.
What if there is a pattern to all these resignations and they are foreshadowing disaster? If these people were all to work together in competition against Widget Co, the disruption to your business could be highly damaging. Quickly you check your files for their contracts of employment; thankfully you followed the first-rate advice you received from BPE Solicitors and the contracts for these key employees all contain relevant post-termination restrictive covenants. While that momentarily calms you, you soon have further questions. If you must go to court to get an injunction to enforce the restrictive covenants, how long will that take? Meanwhile the employees could be taking their widget knowledge anywhere, Get-Wid Co has been longing to discover the secrets to Widget Co’s success - what if they go and work for them?
Perhaps Widget Co should apply for a springboard injunction, in other words an injunction that will prevent the employees misusing any confidential information they have acquired with Widget Co to gain a competitive advantage until the court can determine the issue at a full trial.
You may remember BPE’s newsletter article written about the recent case of Forse v Secarma in which the Court of Appeal considered the test that should be applied before granting a springboard injunction. In the majority of cases there will be a gap between applying for the injunction and trial, and these are the types of cases where time is of the essence. In assessing the interim application, the judge should look at the strength of each side’s case both from the point of view of liability, but also the length of time during which any advantage from the springboard could continue. This cannot be a sort of ‘mini-trial’ (after all there will have been no disclosure of documents and witness evidence will be incomplete) but rather the purpose of granting the springboard injunction will be to “preserve the status quo” to hold the position between the parties to ensure the defendant cannot gain an unfair competitive advantage until the issues can be properly adjudicated.
You slump back in your chair; it’s been a trying morning and there will be much more work to do. Thank goodness that BPE Solicitors have specialist lawyers in both Employment Law and Civil Litigation who can assist the business and guide you through the process. Instinctively you reach for your phone to check-in with social media for a brief respite. What’s this? There is definitely something dodgy here. Bella’s Instagram feed is nothing but dogs: not a cat in sight!
What should you be doing now?
Do your contracts of employment for key employees contain relevant restrictive covenants? If not, it may be time for a contract review.
What does this mean for your business?
Thankfully, for most businesses team moves happen infrequently. But where they do, they can be deeply damaging, and the business may have to react quickly to avoid losing any competitive advantage in the longer term. As well as considering restrictive covenants, it is worth reviewing your business information, including what is considered to be confidential, how that information is stored and who has access to it (and, therefore, how it made its way to a competitor). The court will seek to preserve the status quo, but ultimately they will also need to see clear evidence that any restriction to the Defendant’s ability to carry out its business is justified.
Recommended Reading
A link to case can be found HERE
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.