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Employment Law case Update: Utilitywise plc v Northern Gas & Power Ltd Ors

Sep 28, 2017

In order to prevent unfair competition after employment ends, it is advisable for an employer, where it is possible, to insert a restrictive covenant into the employee’s contract. In the absence of an effective restrictive covenant, an ex-employee may compete with the ex-employer, solicit the former customers of the ex-employer and poach its staff.

In the recent case of Utilitywise plc v Northern Gas & Power Ltd Ors, Utilitywise plc applied for an interim injunction restraining Northern Gas & Power Ltd from poaching Utilitywise employees, in an alleged breach of non-competition clauses in their employment contracts. It is said that at least 75 employees had been approached by NGP, and further anecdotal evidence was supplied of predatory tactics to convince Utilitywise employees to quit and take up an NGP post. Utilitywise maintained that NGP had “lured” its employees away and this amounted to inducing the employees to breach the clauses in their employment contracts.

Utilitywise had a strong prima facie case that NGP had been involved in unacceptable tactics in order to attract Utiliywise employees. The question for the court was whether they should do anything to spot the poaching of employees. The problem for Utilitywise’s case was that not all employees had non-competition clauses in the contracts and those that did had the clauses in different forms. Utilitywise could not say how many employees targeted by NGP had the clauses in their contracts.

The uncertainty as to each contract’s terms and conditions made the order sought by Utilitywise unworkable, as it would be a blanket order to a whole class of employees. Further, it was not NGP’s responsibility to police the order, therefore, Utilitywise should have taken enforcement action against individual employees who were looking to breach their contracts.

The application for a blanket injunction saved Utilitywise the effort of analysing the contracts of each of the 75 employees individually. The court held that it was unfair that the employees were excluded from the hearing and the lack of specificity in the proposed order would also be unfair to them. Utilitywise should have prepared more rigorously and should only have sought an injuction against those employees who were in breach of the restrictive covenants in the employment contracts.

The lesson for employers is to ensure a consistent approach when drafting restrictive covenants and to remember that consistency does not necessarily mean drafting the same restrictive clauses for every employee regardless of their role or position in the company.

 This article is from our weekly Employment Law Newsletter published on 28/09/2017.  If you would like to receive this newsletter directly and be kept up to date with recent cases and Employment Law news, email events@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.