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High Court considers restrictive covenants in employment contracts

View profile for Alexandra Dean
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The facts of this case led the court to consider the dichotomy between two legal principles: the principle that an agreement in resolution of a dispute should be upheld against the principle of restraint of trade.  In such scenarios, the onus is on the party seeking to avoid the agreement to demonstrate that it should be set aside.

The company involved was Capgemini (Capgemini India Private Ltd and Capgemini Financial Services UK) who sought an interim injunction against two ex-employees.  The employees had worked on a particular contract which had subsequently been lost by Capgemini.  Shortly afterwards, the employees resigned and joined the company which had won that business from Capgemini.  A restrictive covenant in their employment contracts prohibited them from dealing with any Capgemini customer on whose contracts they had worked during the last six months of their employment until six months after they had left the company. 

When Capgemini became aware of the breach, they contacted the employees who offered undertakings not to commit further breaches based on the fear of incurring costs in litigation.  However, when their new employer offered to meet those costs, the employees withdrew their undertakings. 

The court considered that the essence of the case was to decide whether Capgemini had established that it was necessary and just to protect its rights with such an injunction. 

Whilst it was possible although not proven that the employees had acquired commercially sensitive information through their work on the contract whilst with Capgemini, the contract had ultimately been irretrievably lost through no fault of the employees.  The court therefore ruled that “an interim injunction would serve no real or useful purpose and would be a disproportionate response to the apparent though limited breach of the clause” describing Capgemini’s loss through any lack of injunction as “vague and tenuous”, especially bearing in mind that the restrictive covenant period was about to expire.

Whilst refusing to invoke an interim injunction, the court did award damages in favour of the company.

This is not legal advice; it is intended to provide information of general interest about current legal issues.

If you require any further information on this or any other employment matter then please contact Alexandra Dean on  01245 228141 or email deana@gepp.co.uk