A senior employee resigns and tells you they are joining a competitor. You then discover that, shortly before handing in their notice, they downloaded sensitive business information. A key client mentions that they have been approached and you hear that a couple of other employees may be considering following them.
You are concerned about the damage this could cause, but what can you do to stop it?
In circumstances like these, an injunction can be a powerful tool. It allows you to ask the court to step in quickly to prevent, or limit, harm to the business.
How can an injunction protect your business?
An injunction is a court order requiring someone to do something, or to stop doing something. In an employment context, there are several types of injunction that you may consider depending on the conduct you are concerned about.
Prohibitory injunctions
A prohibitory injunction prevents someone from taking a particular action. You might seek one to prevent a current or former employee from:
- joining or working for a competitor in breach of an enforceable non-compete restriction;
- contacting or dealing with particular clients;
- encouraging colleagues to leave the business;
- using or disclosing confidential information or trade secrets; or
- breaching their obligations while on garden leave.
Mandatory injunctions
A mandatory injunction requires someone to take a particular action. Depending on the circumstances, you might seek an order requiring an employee to:
- return confidential documents or company property;
- delete confidential information held on personal devices; or
- provide access to information or documents that should be returned to you.
Interim injunctions
An interim injunction provides temporary protection while the underlying dispute is being determined. For example, a former employee could be prevented from dealing with certain clients until the court has determined whether a restrictive covenant is enforceable.
Given the complexity, cost and contentious nature of injunction proceedings, obtaining legal advice at an early stage can be crucial. This can help you to understand what protection may be available and what steps you should take next.
Check your contractual protections
The first step is to establish what obligations the employee owes to the business. This will usually involve reviewing:
- restrictive covenants, including non-compete, non-solicitation, non-dealing and non-poaching clauses;
- confidentiality provisions;
- garden leave provisions; and
- any other relevant contractual documents, such as a shareholders’ agreement.
Particular care should be taken with restrictive covenants. To be enforceable, a restriction must protect a legitimate business interest and go no further than is reasonably necessary to protect that interest. A restriction appearing in an employment contract does not, by itself, mean that the court will enforce it.
The wording of the restriction, the employee’s role and the circumstances in which it was agreed will all be relevant when assessing whether it can be enforced.
Act quickly, but do not act hastily
Having identified a potential breach of the employee’s obligations, or another reason why intervention may be needed, timing can be critical. If confidential information is at risk, clients are being approached or a team move is underway, delay may make it more difficult to argue that urgent court intervention is needed.
Before making allegations, you should gather and preserve the available evidence. This could include emails, messages, access logs, download records and correspondence relating to the employee’s departure. Where there are concerns about information being downloaded or transferred, specialist IT support may also be needed.
It is also important to make sure you have your own house in order before going to court. Injunctions are a discretionary remedy and, particularly where an application is made without notice, a failure to disclose material information can put any order obtained at risk.
Do you need to go straight to court?
Once you understand the employee’s obligations and have gathered the evidence, the next question is whether court proceedings are actually necessary.
In many cases, the first step will be to send a letter before action setting out the suspected breaches and what you want the employee to do. This could include stopping contact with particular clients or colleagues, returning or deleting confidential information, or complying with their post-termination restrictions.
You may also seek undertakings from the employee. These are formal promises to take, or stop taking, certain steps and can provide a way of resolving the immediate concerns without going to court. However, if satisfactory undertakings cannot be agreed, or the situation is too urgent to wait, court intervention may be needed.
What if urgent action is required?
If the threat remains, undertakings cannot be agreed or the situation is too urgent to wait, you may need to apply for an interim injunction.
An interim injunction can provide temporary protection while the wider dispute is resolved. Whether one will be granted will depend on the circumstances, including the strength of your case and the harm that could be caused if the court does not intervene.
There are also commercial risks to consider. An employer will commonly be required to give a cross-undertaking as to damages, which means it may have to compensate the employee for losses caused by the injunction if it is later found that the order should not have been granted.
Before applying, you should consider the strength of your position, the harm you are trying to prevent and whether an injunction is worth the time, cost and risk involved.
Conclusion
Whether the issue can be resolved through negotiations or ultimately requires court intervention, having a clear strategy from the outset can put you in the best position to protect your business.
If you are concerned about an employee’s actions, the key steps are:
- Seek legal advice early to understand the options available.
- Check the contract and identify the obligations the employee may be breaching.
- Act quickly and preserve the evidence.
- Consider the best next step, including whether the position can be resolved through correspondence or undertakings, or whether court intervention is urgently needed.
On a more preventative note, you should also review your restrictive covenants and confidentiality provisions periodically, particularly when employees are promoted or their responsibilities change. Keeping these protections up to date can put the business in a much stronger position if problems arise later.
How can we help?
Our Employment team regularly advises employers where current or former employees are suspected of breaching restrictive covenants, misusing confidential information or otherwise acting in a way that could harm the business.
We have experience acting in complex and urgent High Court disputes involving employee competition, confidential information and applications for injunctive relief. Most recently, our team successfully represented Hattons of London in High Court proceedings against former employees and associated parties, having previously secured an interim injunction to protect the business. Read more here – Herrington Carmichael secures High Court win for Hattons of London in employee competition dispute
We can assist with:
- reviewing employment contracts and restrictive covenants;
- advising on the enforceability of post-termination restrictions;
- assessing suspected breaches and the evidence available;
- preparing letters before action and seeking undertakings;
- negotiating a resolution where possible; and
- applying for injunctions where urgent court intervention is required.
Obtaining advice early can make a significant difference to the options available. If you are concerned about the actions of a current or former employee, contact our Employment team for timely, pragmatic advice on protecting your business.
