A springboard injunction can be granted by a court to restraint former employees from gaining unfair advantage by using their former employers' confidential information or trade secrets in their new businesses.
The UK Court of Appeal set a precedent in 1987 when it held in the case of Roger Bullivant Ltd v Ellis that it was unlawful for an employee to set up his own business and use information belonging to his former employer as a springboard to establish himself.
The verdict, however, limited the use of the springboard injunction to cases concerning the misuse of confidential information. This limitation was later disputed in cases such as Midas IT Services v Opus Portfolio Ltd and Balston Ltd v Headline Filters Ltd, and the law concerning this area has since developed.
The UK High Court recently granted a springboard injunction in the case of UBS Wealth Management (UK) Ltd and another v Vestra Wealth LLP and others (2008). The court questioned whether the remedy of a springboard injunction was confined to cases where former employees threatened to abuse confidential information acquired during their employment, or whether it could also be used in cases where there was no such confidential information, but, instead, simply a breach of contract.
The facts of this case were that UBS, a major global financial services firm, had employed David Scott, one of the defendants, after buying out a stockbroking firm that he had previously worked for. Most of the staff from the firm had been offered jobs with UBS and most of their clients transferred their business to UBS so that they were able to continue dealing with their regular financial advisers.
However, Mr Scott resigned some time after the takeover and founded Vestra Wealth, taking with him 75 UBS staff.
While USB had agreed at the time of his resignation that any restrictive covenants barring him from competing with USB or soliciting its staff or clients would only be valid for four months after his termination of employment, UBS claimed that Mr Scott had acted unlawfully by soliciting their employees and clients. The company sought an interim springboard injunction in order to prevent Vestra and other defendants from taking unfair advantage of alleged breaches of contract of former UBS staff.
The High Court granted UBS' request for a springboard injunction pending trial. The court found that such relief did not only apply in cases where former employees threatened to abuse confidential information acquired during their employment, but that it was also available to prevent any future, or further serious economic loss to a previous employer caused by former staff taking an unfair advantage of any serious breaches of their contract of employment. However, it pointed out that for the injunction to be granted an unfair advantage had to exist and had to be shown to continue to have an effect if the defendant was not restrained.
The outcome of the UK case directly conflicts with recent judgments made in Hong Kong courts. However, employers and employees in Hong Kong should take note and act prudently to review their service contracts and employment policies to incorporate appropriate safeguards in anticipation of the local courts following the persuasive UK authority.
|Q & A on springboard injunctions and post-employment restraints|
|Q1 ||What can an employer do to prevent employees from being poached?|
|A1 ||An employer may review the employment contracts of any employees that may be targeted for poaching and see if they contain (or can contain) suitably drafted post-employment restraints. |
|Q2 ||How can an employer prevent the misuse of confidential information?|
|A2 ||The employer should specifically refer to the information in a suitably drafted post-employment provision. Such a provision can be used in conjunction with other post-employment restraints (such as non-solicitation provisions and non-compete clauses). |