The recent decision in Whitmar Publications Limited -v- (1) David Gamage, (2) Susan Wright, (3) Steve Crawley and (4) Earth Island Publications Limited [2013] EWHC 1881 (Ch) provides guidance as to how the law deals with the respective rights and obligations as between employers and employees at the end of the employment and thereafter.

In this particular case, the Claimant former employer, Whitmar Publications Limited, (“Whitmar”) alleged that the former employees (“the Defendants”) had, while still employed, took impermissible preparatory steps to compete with Whitmar, in anticipation of resigning and that these steps were in breach of their contractual obligations and obligations of fidelity owed to Whitmar. These (alleged) steps included setting up Earth Island Limited, identifying premises from which it could trade and registering a domain name for it. In addition Whitmar alleged that the Defendants solicited other members of staff of Whitmar to join their new venture and approached one of Whitmar’s clients to solicit business. One of the Defendants was alleged also to have tried to use Whitmar’s Linked-In groups for the purpose of the new venture.

Whitmar also alleged that the Defendants misappropriated and misused confidential information belonging to it when they left its employment including business cards obtained during their employment with Whitmar and user names, password and other access details for the Linked-In groups and that these actions constituted breaches of the former employees’ obligations to Whitmar not to take and mis-use its confidential information.

Whitmar’s application to the Court was for orders restraining the Defendants from taking advantage from these breaches (‘Springboard relief’) pending a trial of the action between Whitmar and the Defendants, using the confidential information and an order requiring the Defendants to deliver up to Whitmar the confidential information.

In determining Whitmar’s application, the Court had to take into account that none of Whitmar’s allegations could be proven definitively until trial, because the Court rules provide that issues of fact, as alleged by Whitmar, must be proven by the oral evidence of witnesses following cross-examination before a Judge.

In the meantime the Court had to decide whether it was satisfied, from Whitmar’s written evidence of the witnesses and the documents in support, that it had a sufficiently strong case  on these issues to justify the Court making the orders requested to protect Whitmar from further harm from the Defendants’ allegedly wrongful activities. The Courts understand that orders of the nature requested by Whitmar are of their nature draconian and, therefore, they will only grant such orders where the Claimant’s case is strong. The Judge decided that Whitmar did have a strong case on these issues and granted the orders. With regard to the Springboard relief, the Judge decided that there was a strong case that the Defendants would gain an unfair competitive advantage against Whitmar from their wrongful possession of the business cards containing customer details, and that therefore they should be restrained from trying to get business from those customers for a period.

Although not specified in the judgment made in respect of Whitmar’s application, the Court has to give Defendants some protection in case a Claimant’s case ultimately fails at trial and the Court decides that the Claimant should not have been given the benefit of the orders at the outset of the action.  This protection is given by way of a cross-undertaking in damages by a Claimant like Whitmar to pay the Defendants money to compensate them in the event that it is ultimately decided that the orders should not have been made.

The very important lesson for employees considering moving on from an employer, either to a new employer or to set up a new business, is that the Courts will and do protect the original employer from unfair competition arising out of wrongful activity carried out by the employees while still employed by it or from taking confidential information belonging to it and seeking to use that confidential information for their new employment or business. Court proceedings of this nature are typically conducted on an urgent basis, as former employers seek to protect themselves from what they consider to be unfair competition. The urgency creates very significant legal expense which typically becomes the liability of the losing party.

This means that the risk to individuals involved in such legal proceedings is extremely high. The appropriate way to protect against such risk is being absolutely sure that any activity carried on prior to and following the end of employment is wholly in accordance with the terms of the employment and the employees’ obligations of fidelity and good faith. The best way to do this is to take legal advice before doing anything else.

If you require further information about this subject, please speak to Julian Johnstone, head of Druces LLP’s Litigation & Dispute Resolution team.