How far can employers go in preventing perceived disloyalty by former employees? A recent Court of Appeal case might put off employers who are considering somewhat aggressive forms of litigation. In Caterpillar Logistics Services (UK) Ltd v Huesca de Crean the High Court’s decision to refuse an interim injunction based on a confidentiality clause was upheld on appeal.
The Facts
The defendant was employed by the claimant as an account manager. Her employment contract contained no post termination restrictive covenants but did include a standard confidentiality clause in respect of her employer’s trade secrets and confidential information. The clause operated both during her employment and post termination. Following her resignation, the employee began working for a customer of the claimant in a role that allegedly mirrored her former position at the claimant’s business.
The Claim
The claimant sued the defendant on the basis that her new position exploited its confidential information and that she was in breach of a fiduciary duty. The claimant sought an injunction preventing the use or disclosure of confidential information by her and a “barring out order” preventing her from working on any commercial business conducted with her former employer. The claim was struck out for having no cause of action.
The Appeal
The Court of Appeal upheld the decision of the High court and made a number of significant observations in its decision:
- The court had power under section 37 of the Senior Courts Act 1981 to grant barring-out relief, but if it could ever be granted to an employer against an employee it could only be in the most exceptional circumstances.
- Although the former employee may have had some fiduciary duties in respect of the claimant, she was not a fiduciary in the sense that a trustee or solicitor is to a beneficiary or client. It would only normally be appropriate to grant barring-out relief in such cases.
- A normal injunction preventing breach of confidentiality might be appropriate but in this case the defendant had offered a contractual undertaking and there was no evidence of a breach of confidentiality.
- The court was highly critical of the aggressive tactics pursued by a corporation against an individual, particularly when an amicable solution had not been sought.
Conclusion
Employers seeking to protect their business from the activities of former employees should ensure that employment contracts contain appropriate post termination restrictive covenants. Attempting to rely on aggressive forms of litigation after the fact may turn out to be counter-productive.
If you would like more information regarding post termination restrictive covenants or any other Employment matters, Rollingsons has experienced lawyers who can advise you. Please contact Aneil Balgobin via e-mail ABalgobin@rollingsons.co.uk or by telephone on 0207 611 4848.
