Legal

Mitigating the impact of an unlawful team move

29 May 2019 By Toni Lorenzo, Michael Anderson and David Samuels

Can you prevent former employees from competing even in the absence of enforceable restrictive covenants? Toni Lorenzo, Michael Anderson and David Samuels report in light of a recent Court of Appeal ruling

Forse v Secarma acts as a helpful reminder that where employees leave a company with the intention of competing and diverting business, it may be possible to secure an injunction to stop them, even where they are not subject to contractual post-termination restrictive covenants (PTRs). The touchstone is whether the employees have conspired together while employed and/or misused confidential information.

The original case was brought by Secarma, which runs a cybersecurity consultancy. The defendants included individuals who were former Secarma directors and employees, together with a competitor company which had recruited Secarma’s employees. They were alleged to have entered into a conspiracy to poach a team of employees and, with them, key parts of Secarma’s cybersecurity business. 

Most of the employees concerned were not subject to PTRs (such as non-compete obligations) and Secarma therefore applied successfully to the court for a so-called ‘springboard’ injunction. Springboard injunctions are designed to neutralise any ‘springboard’ time advantage gained as a result of unlawful activity. The defendants sought to appeal the court’s decision.

Springboard injunctions are often appropriate where departing employees may not have breached specific, express contractual obligations but where they have nonetheless damaged (or attempted to damage) their former employer’s business by unlawful means, for example by stealing and then using confidential information or by working together to divert business. 

In rejecting the defendants’ appeal and thereby maintaining the springboard injunction, the Court of Appeal clarified the tests which a claimant must pass to secure such relief. It explained that, in deciding whether it is appropriate to grant a springboard injunction, a judge will generally need to consider whether the – often limited – evidence available at an early-stage ‘interim’ hearing points to there being a serious legal case to be considered in more detail at a future trial. If the judge is of such a view, they would then need to reflect on whether it would be appropriate to grant an injunction to prevent any additional wrongdoing by the defendants.  

Protecting the injured

The Court of Appeal was at pains to explain that the purpose of a springboard injunction is “to protect the injured and not punish the guilty”. The idea will be to undo any unfair head start gained by the wrongdoers as a result of their misconduct. 

For example, if a whole team has been poached in suspicious and possibly unlawful circumstances, a springboard injunction might be designed to stop that team from competing for a period so the victim company has some time to shore up customer relationships and rebuild its workforce.  

Once the judge has decided to grant the injunction, it must consider how long it should last. If, say, it would have taken six months for the defendants to build a team by way of a fair recruitment process, the court may deem that in poaching that team unlawfully, they have enjoyed a six-month advantage and their activities should therefore be suspended for that period. 

When faced with the storm of a possible team move, it is always important to consider all options available to protect a business. While companies often concentrate on the enforcement of PTRs, it is also worth considering the useful weapon of springboard injunctions, which may deliver the result a business urgently needs even where its contracts are not up to the task.

Toni Lorenzo and Michael Anderson are partners and David Samuels legal director at Lewis Silkin LLP

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