Blake Lapthorn helps another recruiter shut down unlawful
competition
Blake Lapthorn's Recruitment sector group
has successfully advised an employment agency when it recently
shut down the unlawful activities of a competing business
established and operated by a former employee. With flagrant
disregard for the restrictive covenants contained in his employment
contract, the former employee removed and used confidential
information and attempted to poach our client's entire business. We
helped our client obtain an urgent injunction against the former
employee which prevented him from contacting or dealing with our
client's candidates, clients and employees. We also helped our
client to obtain a substantial costs order. The Court's orders
effectively put the former employee's competing company out of
business.
Our client operates a driver recruitment business that is based
principally in London and the South East. It is a family run
business, which can trace its roots back over 40 years. The former
employee had been employed by our client for 13 years during which
time he had become the company's senior recruiter. At the time of
his departure, he also fulfilled a senior managerial and strategic
role. He therefore knew everything about our client's business
model and operational issues, and he had close working
relationships with clients, candidates and employees.
Upon leaving our client's business, the employee said that he
was going to leave the driver recruitment sector. However, our
client later learnt that within weeks of leaving he had set up a
company clearly intending to operate in the driver recruitment
sector, and had secured invoice finance. Our client's concerns and
suspicions increased when they received reports from candidates
that he had been in contact with both candidates and clients in a
blatant attempt to attract business away from our client.
The pattern of his behaviour suggested that he was actively
soliciting business away from our client, who had good reason to
suspect that he was using its confidential information, such as
clients' seasonal demands, contract rates and arrangements,
candidate experience, skills, likely availability and relationships
with clients, to target particular candidates and clients. Our
client even obtained evidence that he was contacting clients in
order to persuade them to divert existing contracts away from our
client to his new business. He was also defaming our client and the
management team to both clients and candidates in an effort to
entice them away to his new business.
Our client also suspected the former employee had a 'mole' in
our client's business who was a continuing employee. Our client had
good reason to believe that the mole supplied the ex-employee with
a complete copy of our client's client database.
These activities were having a significant effect on our
client's trade and, had the employee been allowed to continue
unchecked, his actions may well have had a much more profound
effect on our client's business in a way that could not readily be
calculated in financial terms.
As is, or should be, common practice for recruiters, the
individual had entered into an employment contract that contained
restrictions on his activities during and after employment.
Restrictive covenants are aimed at preventing departing employees
from, amongst other things, soliciting business, doing any business
with certain clients, or engaging employees or candidates for a
certain period following departure. It is essential for employers
to have enforceable restrictive covenants in their employment
contracts, particularly in relation to employees with access to
sensitive information and certainly all senior employees. In this
case, given the individual's position within our client's
organisation, his restrictive covenants came into sharp focus in
light of his activities following termination, and they ultimately
provided our client with the protection it required.
Our client obviously wanted to stop the ex-employee's activities
that had the potential to damage its business significantly. An
injunction is an effective legal solution in such a case and is an
order made by the Courts that prevents someone doing or continuing
to breach (in this case) contractual obligations. Such orders are
very serious and often have a dramatic effect on the relevant
party's activities (in this case, the ex-employee's new business).
In addition, if any party served with such an order breaches its
terms, they can be subject to committal proceedings and,
ultimately, sent to prison.
Our client's application for an injunction was successful. The
court unhesitatingly granted the order, which not only prevented
the individual continuing to breach his restrictive covenants but
also compelled the individual to delete confidential data and to
deliver up all copies of our client's databases. He was also
ordered to provide a witness statement with details of those
clients and contacts he had contacted and to what end. Furthermore,
the court awarded our client an order for a significant amount of
its costs in pursuing the application. After his invoice finance
providers were alerted to the extent of the order, they withdrew
the facility and the individual has since gone out of business.
protecting your business
Blake Lapthorn's Employment and Commercial Litigation teams
advise its recruitment company clients on an almost constant basis
on the most effective ways of protecting their businesses from
unlawful competition, particularly in the context of unfair use of
confidential information by former employees.
You can help to protect your business by ensuring that:
- you have a valid, signed employment contract for all employees
and that all your employment contracts contain appropriately
drafted and enforceable restrictive covenants, particularly for
senior employees, to deal with post-termination restrictions such
as non-competition, non-dealing and non-solicitation
- you have good security procedures in place and appropriate
policies to deal with email monitoring and the use of social and
professional networking sites
- you remove an employee from the workplace as swiftly as
possible if you suspect that he or she is taking steps to
compete
- departing employees deliver up all company property including
copies of all documents that contain commercially sensitive
information, copies of client lists and contact details, etc
- you remind departing employees of their post-termination
restrictions
- you act quickly and speak to a lawyer as soon as possible if
you suspect an ex-employee is competing unlawfully
- you gather as much evidence as possible, in particular, from
email accounts, social and professional networking sites, etc
- you preserve key evidence and, if necessary, instruct computer
forensic experts (we can advise and recommend)
- if appropriate, you report the matter to the Employment Agency
Standards Inspectorate (EASI) who will investigate your
ex-employee's activities and, where appropriate, issue a fine
and/or a prohibition order (again, we can advise), and
- you take steps to secure relationships with key clients,
candidates, suppliers and other employees.
If the worst comes to the worst, and an employee steals data or
tries to compete unlawfully, contact us without delay, any
time.
