Court of Appeal critical of heavy handed attempt to injunct former employee

Posted on March 23, 2012 by Martin Malone

In Caterpillar Logistics Services (UK) Ltd v de Crean, the Court of Appeal has upheld the refusal of an injunction application against a former employee.

Mrs de Crean had worked in a senior capacity and had a contract which included a confidentiality agreement but did not include terms restricting her activities after her employment ended. Three weeks after she resigned to join another company, the employer, with no prior warning, sent a long letter to her threatening legal proceedings. It made allegations of misconduct and demanded that she give undertakings not to use or disclose confidential information as they defined it, and also agreeing not to carry out certain areas of work in her new job. She was not prepared to give undertakings in these terms and the employer attempted to seek an injunction, first in the High Court and then in the Court of Appeal.

Both courts refused the application, and were highly critical of the employers’ over-reaction to the situation and their high-handed actions Continue reading →

BA and Unite – update

Posted on May 18, 2010 by Martin Malone

[picappgallerysingle id="8828664" align="left"] The Court of Appeal will begin hearing submissions at 2.00 p.m. this afternoon in order to determine whether Unite will be granted leave to appeal against yesterday’s injunction which prevented the latest scheduled strike from going ahead.

As has been widely reported, Mr Justice McCombe granted an injunction in favour of British Airways following a procedural challenge. Unite was claimed not to have complied with section 231 of the Trade Union and Labour Relations (Consolidation) Act 1992. It should be noted that the requirement set out in the Act is clear and unambiguous:

231.
As soon as is reasonably practicable after the holding of the ballot, the trade union shall take such steps as are reasonably necessary to ensure that all persons entitled to vote in the ballot are informed of the number of—
(a)votes cast in the ballot,
(b)individuals answering “Yes” to the question, or as the case may be, to each question,
(c)individuals answering “No” to the question, or, as the case may be, to each question, and
(d)spoiled voting papers.

British Airways maintained that the information was readily available from the scrutiniser’s report but Unite had not taken any active steps to make the information available to those who had been entitled to vote, hence the breach of section 231.

Unite maintained that the information was available from websites, notice boards at work and news sheets available at various locations. Was this sufficient to discharge the obligation set out at section 231?

The judge applied the decision in Metrobus -v- Unite the Union [2009] EWCA Civ. 829. Significantly, in that case, an injunction was granted against Unite preventing industrial action on the basis that the union did not notify the outcome of the ballot within a reasonable time and did not provide sufficient detail about the numbers taking industrial action at each depot. Accordingly, one might reasonably have thought that Unite would in this case have been meticulous in ensuring compliance with the statutory requirements. Evidently they were not, although the failure to identify 11 spoilt ballot papers does seem a very fine point on which to have determined that industrial action should be prevented.

Of course, the decision has led to some branding what has happened as “an assault on democracy” but the background to yesterday’s hearing does help to set the context. The details are set out in the statute for all to see and this is by no means new law. While it all very well for people to complain about what appears to be a disproportionate impact resulting from a technical non-compliance, it is important to remember that judges are given the responsibility of applying statute law and not disregarding it. The statute exists and contains precise and strict requirements with serious consequences resulting from non-compliance. All that happened yesterday was that the law was correctly applied. Whether the legislation should exist in its present form is, of course, the much larger question, but one which did not need to trouble Mr Justice McCombe yesterday.

post termination covenants – non-competition – period of restriction

Posted on May 17, 2010 by Martin Malone

[picappgallerysingle id="7776916" align="left"]Many employers are worried about employees leaving to work for a competitor and therefore seek to impose restrictions on what the employee can do after termination of employment. These post-termination covenants are clearly in restraint of trade and therefore contrary to public policy. However, they are permitted if they can be shown to be reasonably necessary to protect legitimate business interests. The protection should be no more than is necessary so restrictions which are too wide in area or too long in duration cannot be enforced. Consequently, there is a balancing act required in order to achieve effective restrictions.

In Phoenix Partners Group LLP -v- Maurice Asoyag (21 April 2010) the High Court was asked to consider whether restrictions for a period of six months should be enforced. Mr Asoyag began working for Phoenix in July 2009. He had previously worked for other financial institutions including Merrill Lynch, Nomura and Credit Suisse. His job with Phoenix included brokering equity derivatives related to various indices including in particular the FTSE, EuroStoxx and DAX as well as cash equities derivatives.

On 8 December 2009 he handed in his notice and was placed on three months’ garden leave (pursuant to his contract of employment) so the practical date of termination of employment was 7 March 2010. Mr Asoyag had been offered employment with GFI Holdings Limited with his employment scheduled to commence on 8 March. He asked to be released from his restrictive covenants but was refused and he nonetheless started working for GFI on 8 March. On 9 March solicitors acting for Phoenix wrote to Mr Asoyag and asked him to provide undertakings to observe the restrictions. He refused. On 25 March Phoenix applied for an injunction.

The restrictions in this case are in a very standard form:

12.1 The Employee acknowledges that during the course of his employment with the Company, he will receive and have access to Confidential Information and accordingly he is willing to enter into the covenants set out in this Clause 12 in order to provide the Company and any Group Companies with what he considers to be reasonable protection for those interests.
12.2 The Employee shall not, in any Capacity, save in respect of a Permitted Interest or with the prior written consent of the Members (which shall not be unreasonably withheld), for a period of six months (subject to Clause 12.6) from the Termination Date within the Restricted Area carry on or be concerned or engaged or interested in any part of a trade or business which competes with any part of any trade or business carried on by the Company in which the Employee shall have been actively engaged or involved at any time during the Period…
12.3 The Employee shall not in any Capacity for a period of six months from the Termination Date (subject to Clause 12.6) in competition with the Company or any Group Company and in relation to the business activities of the Company in which the Employee has been engaged or involved during the Period:

(a) solicit approach or offer goods or services to or entice away from the Company any person, firm or company who was either

(i) a client or customer of the Company during the Period with whom the Employee has been actively engaged or involved by virtue of his duties under this agreement during the Period; or

(ii) a prospective client or customer of the Company with whom or which as at the Termination Date there are negotiations ongoing with a view to him or it becoming a customer or client of the Company or any other Group Company and where the Employee has been actively engaged or involved in such negotiations in the performance of his duties under this agreement;

(b) deal with or accept custom from any person, firm or company who was either

(i) a client or customer of the Company during the Period with whom the Employee has been actively engaged or involved by virtue of his duties under this agreement during the Period; or

(ii) a prospective client or customer of the Company with whom or which as at the Termination Date there are negotiations ongoing with a view to him or it becoming a customer or client of the Company or any Group Company and where the Employee has been actively engaged or involved in such negotiations in the performance of his duties under this agreement …

The High Court Judge noted that normally, with such an application, there would be no need to do more than show that there was a serious issue to be tried in relation to the breach and the issue of enforceability. However, the period of restriction being sought in this case was less than three months so that there was no real prospect of a trial taking place before the expiry of the restrictions. It was therefore necessary to consider whether injunctive relief would be granted at trial. In this context the period of garden leave was significant because it meant that Mr Asoyag had not been “actively engaged or involved” with protected activities in those three months and it is clear from the judgment that the period of the restriction had to be reduced by the period of garden leave, hence the resulting period of less than three months.

There was significant doubt about whether Mr Asoyag’s activities working for GFI would compete with Phoenix in specific markets in the relatively short remaining period. Accordingly the application for injunctive relief was refused.

The decision is a useful reminder that restrictions will not be enforceable unless they can be shown to be necessary. It is also important to consider the potential overlap between the protections sought through garden leave provisions and post-termination covenants. At first glance, most people would have regarded the restrictions in this case as reasonable in terms of area and duration but it does not follow that relief will be granted.