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Contracts of employment to restrict key employees from releasing confidential information or working for competitors.

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Scoring a goal for career freedom

Like Wayne Rooney, everyone has the right to reap the benefits of their career success, and employers cannot stall the progress of key employees by imposing conditions after someone moves on – it’s got to be in their contract, and even so any restriction has to be reasonable.

Wayne Rooney did it, and now an ex employee of Caterpillar has done it.... 

No, she’s not in the premier football division, and she’s never scored for England, but she has managed to beat an attempt to stall her career success.

Englandand Manchester United player Rooney went to the High Court when an agent refused to end the image rights contract the footballer had signed as an 18 year old rookie player at Everton, which gave them the cream of his footballing career.

And for Huesca de Crean, landing a job with the customer she had been serving at Caterpillar looked like a step up in her career, until the move stopped her former bosses in their tracks, leading to a stand-off over a gagging order as they thought confidential information could be at stake. 

Although Huesca won at every stage, her case went all the way to the Court of Appeal, where the judges came down firmly on her side, saying that it’s up to the company to get their employment contracts right for key employees if they want to restrict who they work for in any new job. 

“The company could have imposed a reasonable level of restriction on Ms de Crean if they had done it through her contract, and the message from the Court was that they would not close the stable door for them, once the horse had bolted,” explained Alex Dean employment specialist of Chelmsford based lawyers Gepp & Sons.   “Companies can’t expect the courts to deal with their oversight.” 

When Huesca de Crean worked for Caterpillar Logistics Services she was responsible for the relationship with a particular client under a long term logistics services agreement, where she had access to a large amount of confidential information including legal advice in relation to the client’s contract.

When the client offered Huesco a job, she accepted, knowing that there was a clause in her contract with Caterpillar that meant she could not discuss the confidential information outside the company, but there was nothing to stop her from taking up the new job.

But Caterpillar applied to the courts, to try and get a barring order that would stop her being involved in anything to do with their contract, and demanding that she be kept out of any dealings. They also tried to get a court injunction to prevent her from disclosing any confidential information.

The case went first to the High Court and then to the Court of Appeal, and each time they refused both the barring order and the injunction.  The barring order was refused on the grounds that it was excessive in an employer/employee relationship, because it was trying to restrict freedom in the labour market.

And the injunction was rejected as well, because Huesca had already given Caterpillar an undertaking not to release any confidential information and the judges said this was sufficient, looking at her good conduct record.

Alex added:  “If you have a key employee and you want to make sure they don’t move to a client or a competitor, then you need to put a clause in their contract of employment that stops them from doing so. 

“But if you do this, it’s known as a ‘restrictive covenant’ and these clauses need to be drafted very carefully because they are anti-competitive. This means that they are against public policy and will only be enforceable if they go no further than is necessary to protect the employer’s business.  Any further, and courts will kick out the whole covenant, so you’ll be left with nothing. 

“A good example of this was the recent case of Wayne Rooney’s management contract which he signed as a rookie 18 year old player whilst at Everton.  The contract bound him to use the managing agents for eight years, which was most of his footballing life, and the courts said this was unfair, and allowed Rooney to break the contract.”

For further information please contact Alexandra Dean of Gepp & Sons on 01245 228141 or deana@gepp.co.uk

Caterpillar Logistics Services (UK) Ltd v Huesca de Crean (EWCA/Civ/2012/156)

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

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