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Tuesday, 20 March 2007

Departing employee restrained by Full Nelson

The decision of Mr Justice Nelson, of the Queen's Bench Division (England and Wales) last Thursday in Intercall Conferencing Services Ltd v Steer [2007] EWHC 519 (QB), so far only noted on Lawtel, addresses an important practical issue for any business that wants to protect the confidentiality of information that is used in the place of work.

Intercall employed Steer, who was a senior employee, under a contract of employment included an express confidentiality agreement, as well as a post-termination non-competition clause that banned him from working for six months for named businesses that competed with Intercall. Almost inevitably Steer resigned and told Intercall that he was joining one of the prohibited competitors.

Seeking interim injunctive relief, Intercall submitted evidence that Steer had had full access to confidential information and argued that there was a real risk of a breach of confidentiality if Steer worked for its competitor during the prohibition period. Steer disagreed, maintaining that (i) he did not possess any confidential information, (ii) he considered himself bound to respect the confidentiality of Intercall's information and (ii) he had not breached the agreement. He added that he was prepared to undertake to the court that he would not breach any duty confidentiality owed to Intercall when he worked for his new employer.

Left: another technique for restraining a Steer

Nelson J granted Intercall the relief it sought. He concluded that Steer did indeed have access to confidential information and that there was a real risk of a breach of his duty of confidentiality. On the facts, the non-competition clause was neither too wide nor too vague - and the time limit of six months was not unreasonable. The nature of Intercall's confidential information, whether transmitted advertently or inadvertently to the named competitor, was such that its transmission could result in a loss of Intercall's customers or to Intercall's employees being poached. Given that Intercall's potential loss was difficult to calculate, Steer's undertaking as to confidentiality was not sufficient to remove the risk of damage.

The IPKat says that most post-employment restraints he has seen over the years have been over-the-top and almost certainly void as being in restraint of trade. The basic principle is that if you seek to impose the restrictions you really need, rather than those you really desire, you're more likely to get a favourable outcome. Merpel adds, I wonder how many employers who name specific competitors in no-competition restraints like this one have also got an adequate system in place for monitoring the list from time to time and amending it as old competitors disappear and new players emerge.

Full Nelson here
Half Nelson here
Nelson superstition here

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