eSignature Lawfulness for Non-Solicitation Agreement in United Kingdom

How to eSign a document: e-signature lawfulness for Non-Solicitation Agreement in United Kingdom

hello and welcome to uk employment law the view for mayor brown podcast this is a fortnightly podcast series for employment lawyers and hr practitioners which highlights recent case law and legal developments of importance to uk employers it is presented by members of mayor brown's employment team and occasionally features special guest speakers who are involved in changes in employment law the time spent listening to these podcasts can count towards your continuing education requirements and at the end of the podcast we will explain how to get in touch if you wish to claim credit for continuing education purposes or if you have any comments or questions we hope you enjoy the podcast hello and welcome to the mayor brown employment podcast my name is chris fisher and i'm the head of the london employment group at mayor brown in this episode i wanted to talk about a recent court of appeal decision on non-compete covenants called plain on limited and gilligan this is not so much about when a non-compete clause will be sufficiently reasonable to be enforceable but more the process of how you obtain an initial temporary injunction to enforce the covenant in the first place now two particular aspects that came out on this case were how quickly an employer needs to take action once it knows of a potential breach of the covenant and secondly how relevant the employee's loss of income will be where the impact of an injunction might be that the employee cannot earn a living for a period of time so the facts in the case were these mr gilligan was a sales manager for planon which designed developed and sold facilities management software he resigned his job on the 23rd of july 2021 and to go and work for a competitor called servicenow although he didn't initially make it clear to planon that he was joining that company now he only had one month notice period and planon put him on garden leave on the 6th of august on the 2nd of september planon discovered that mr gilligan had joined servicenow the day before on the 1st of september mr gilligan's contract included a variety of restrictive covenants including a 12-month non-compete clause plain on solicitors wrote to mr gilligan on the 20th of september asking for undertakings and that led to some correspondence with mr gilligan's solicitors but no agreement was reached and on the 21st of october plane issued proceedings seeking amongst other things an injunction to enforce the non-compete clause an application for an interim injunction came on before a high court judge on the 5th of november now as many of you will know the test for granting an interim injunction in situations like this is relatively low the court is not assessing the enforceability of the covenant in full it's simply asking the question whether there is a serious issue to be tried and whether damages will not be adequate as a remedy for the employer seeking the injunction that's the classic test from the 1975 case of american syrnamid and ethicon now there is a third limb to that test which is that once the court is satisfied that there's a serious issue to be tried and damages won't adequately compensate the employer then the court has to consider what's known as the balance of convenience and whether that favors the granting of the temporary injunction or not often the court will come down in favor of the employer who's seeking the injunction when it gets to the balance of convenience and that's really for two main reasons first it's normally possible um to order what is known as a speedy trial which means the full hearing will come on very quickly after the interim hearing often only a matter of two to three months if not less so if the employee is required to stop working it will only be for a fairly short period of time and secondly the view is often that the employee can be compensated in damages anyway for any lost earnings if when peop when they get to the full trial of the claim the injunction is unsuccessful and the covenant is not upheld the employer seeking the injunction pays damages to the employee and they're compensated for their lost income on the other hand it's often extremely difficult to quantify the damage an employer will suffer if an employee is allowed to compete so what was surprising in the gilligan case is that the judge refused to grant the interim injunction and the court of appeal has recently upheld that decision and the reason the judge refused was the significant damage he felt would be suffered by mr gilligan from being out of work planon had tried to argue that he could leave his job at servicenow and get a different job in the wider software sales market but the judge didn't think that was particularly realistic he said that based on the drafting of the covenant it was likely mr gilligan would not be able to find any other employment because his skills were quite niche he was very much focused on the facilities management software market and the judge put great weight on the evidence that mr gilligan had given as to how he would be impacted by not being able to work mr gilligan had pointed to the fact that the non-compete clause was for a long period of time 12 months he said he was married with a wife who worked only part-time and they had a ten-year-old son to look after he said they had a mortgage and were financially supporting his wife's family in brazil who'd been impacted by the pandemic as i say the court of appeal upheld the way in which the judge exercised his discretion on this point the leading judge in the court of appeal lady justice lang said that she thought the case was borderline but she still upheld the judge's decision but one of the other judges lord justice bean went much further he said that the fact that planon would ultimately have to compensate mr gilligan if they were unsuccessful at the full trial was simply not good enough he said that accepting cases of wealthy defendants or where the employer claiming the injunction was offering paid garden leave for the period of the non-compete clause the offer of compensation through damages later on was not enough and he also referred to the fact that it was unlikely that servicenow would be able to offer mr gilligan any work that would not breach the non-compete clause so the interim junction was not granted on the basis that the balance of convenience favored mr gilligan although it wasn't part of the judge's reasoning the other aspect of the court of appeal judgment that's interesting i think is the the issue of delay and the length of time the plain on had taken to issue its proceedings and again lord justice bean had much stronger words on this than the other judges he was very critical of the length of time planon had taken first the length of time they took to write the letter before action having discovered that mr gilligan had started at servicenow on the 2nd of september it wasn't until the 20th of september that they wrote their first lawyers letter and then they waited another month before issuing proceedings on the 21st of october so that by the time the injunction hearing came on um on the fifth of november mr gilligan had been working at servicenow for over two months and lord justice bean said the significance of that was that if plano's argument was right which was that mr gilligan's new job posed such a severe threat to their trade secrets and customer connections then surely the damage had been done in the first few days of his employment and certainly well within the period of two months so in law justice bean's view the delay in this case would have been another ground on which the judge could have refused to grant the interim injunction so what are the practical implications of this case well on delay i don't think the comments are hugely surprising in particular with a non-competition clause rather than for example a non-solicitation or a non-dealing with clients clause if the employee is allowed to start work in breach of the clause then unless they're doing that covertly without the employer's knowledge it's going to be very difficult i think for an employer to obtain an injunction unless they take action almost immediately there may be time for a letter seeking urgent undertakings for the employee to stop work but really the employer at the same time has to be preparing its proceedings and its application for the interim injunction and certainly in this case waiting over a month and a half was far too long and if you look at lord justice bean's comments again that the damage is done in the first few days you can see that the courts really do expect steps to be taken almost immediately so no huge supply on delay i don't think but the comments on the financial impact on the employee and the inadequacy of the undertaking in damages that the outgoing employer has to give are much more significant i think certainly more thought now will be taken by employers seeking injunctions such as these to the financial impact that an injunction will have on the defendant employee evidence will need to be put forward of any known income or other resources that the employee might have or whether it's possible for them to carry out other work despite being subject to an injunction and it will be relevant too i think to inquire whether the employee is being indemnified by their new employer and whether that indemnity extends to covering their salary if they're kept out of work by a temporary injunction and to pick up on lord justice bean's comment it may be that the ultimate offer by an employer seeking injunction will be an offer to continue to pay the employee's salary or a good portion of it to reduce the financial implications that an interim injunction will have and finally a well-prepared claimant employer will also make inquiries with the court before the interim injunction hearing to find out how quickly a speedy trial of the main action can come on for hearing as i say these are often possible within a matter of weeks from the interim hearing and the quicker that hearing can come on the more limited the financial impact on the defendant employee will be and that may be enough to tip the balance back in favor of the employer seeking the injunction so that's the case of plain on limited and gilligan and that's the end of this episode of the employment podcast i hope you found it interesting and if anyone has any questions about the case or anything else please do contact us in the usual way until next time do take care and we look forward to speaking to you again next time thanks for listening and goodbye for now so that concludes this podcast we hope that you find it and others in the series helpful if you have any comments or questions or want to know how to claim continuing education credits please email christopher fisher head of mayor brown's london employment team at seafisher mayorbrown.com thank you for listening to the podcast you