Beware - No Post Termination Employee Restrictions!

Perhaps a chink of light. 

A recent decision in the High Court (Thomson Ecology Limited & Another v APEM Limited) has provided some support for employers who face an attack from a senior employee who leaves and tries to take the business with him.  In this particular case there were no post termination restrictive covenants or any express terms limiting the employee’s use of confidential information. The employee planned to form a competing company with a similar name, registering similar domain names and attempting to employ large numbers of the employer’s staff.

The employer brought High Court proceedings including an allegation that the employee had breached his fiduciary duty (which requires an employee to act in the interests of their employer) and the duty of fidelity (which requires an employee to have regard to their employer’s interests, although this does not require the employee to place their interests behind those of the employer).

In an application for summary judgment the Court has decided that the employee did break his implied duty of fidelity by failing to inform the employer of his plans, discussing confidential information about staff salaries, arranging meetings with his work colleagues at his home to discuss the possibility of them changing employment to the new competitor and colluding with a competitor to identify and recruit members of the employer’s staff.  The Court has deferred a decision as to whether there was also a breach of his fiduciary duty. 

So potential good news for employers but the advice remains the same.  It is essential to ensure that all members of staff, and in particular senior members of staff, have in place well drafted contracts of employment which include appropriate provisions with regard to the use of confidential information and reasonable and enforceable post termination restrictions. You have been warned!