Enforcement of non-compete clauses
29 June 2022
The Court of Appeal has upheld a decision by the High Court not to grant an interim injunction to enforce a non-compete clause against a former employee.
Planon Ltd v Gilligan [2022] EWCA Civ 642
Facts
The employer company, Planon Uk Ltd, develops and sells facilities management software. It initially employed Mr Gilligan in 2015 as an account manager, issuing him with a contract containing various post-termination restrictions, including a 12 month non-compete clause. In 2020, Mr Gilligan was promoted to sales manager and was issued with an amending agreement, but this did not affect the post-termination restrictions.
In 2021, Mr Gilligan gave a month’s notice to terminate his employment. He refused to tell his employer who he was going to work for but stated that it was not the employer’s main competitor, ServiceNow UK Ltd, or any other competitor, in a role that would compete with Planon. He indicated an intention to comply with the spirit of the post-termination restrictions, even though he considered them unreasonable.
Mr Gilligan was put on garden leave two weeks into his notice period. After the end of his notice period, he started working for ServiceNow. His former employer sought an interim injunction to enforce the non-compete clause.
The High Court refused to grant an interim injunction, on the basis that the non-compete clause, as drafted, was likely to prevent Mr Gilligan from working for anyone in the software market for 12 months and at the very least, it would be extremely difficult for him to find alternative employment. The Court considered that Planon’s prospects of successfully enforcing the non-compete clause at the full trial were not very good, meaning that it was not prepared to grant the injunction.
Planon appealed the Court’s refusal to grant an interim injunction to the Court of Appeal.
Court of Appeal decision
The Court of Appeal has dismissed Planon’s appeal, but based on different reasoning to the High Court. The High Court judge had only taken into account the likely effect on Mr Gilligan’s employment prospects, and did not make reference to the criteria on which he had assessed reasonableness of the restriction.
In addition, the delay in the case being heard by the Court of Appeal meant that Mr Gilligan had been employed by ServiceNow for seven months at the time of the hearing, meaning that it was contrary to the balance of convenience to grant an injunction when the period of restriction in question had only four months left to run.
Consequences of this decision
The Court’s decision in this case highlights how difficult it can be for employers to enforce restrictive covenants, and in particular a lengthy non-compete clause that effectively prevents an individual from getting another job in the same sector. A shorter, less wide-ranging restriction, would be more likely to succeed.
Applications for an interim injunction must be made very quickly after learning that an employee is working (or planning to work) for a competitor, if an employer wants to succeed in persuading the court of the potential damage to their business. Any delay will suggest a lack of urgency, and that will not assist in the employer’s claim.
For advice on issues raised in the article, please contact our Employment Team.
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Liz Stevens
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at June 2022.