The Employment Relations Authority has awarded an interim injunction to an employer, to prevent their ex-employee from working for one of their direct competitors.

The employee’s employment agreement contained a restraint of trade clause, which specified that if he were to stop working for the employer, he could not work for a direct competitor for the following six months.

Due to stress, the employee decided to resign. During the notice period the employee got a job with a direct competitor of the employer.

The employee worked out his 90-day notice period but refused to tell the employer where he had been hired, despite being asked multiple times. The employer had also reminded the employee of the restraint of trade clause in his employment agreement.

The employee eventually informed the employer seven working days before his date of resignation that he was going to work for a direct competitor. The employer then applied for an interim injunction preventing the employee from working for the competitor company.

An interim injunction is an order by an Authority to prevent a person from doing something for a particular amount of time. 

To award the interim injunction, the Authority had to consider three elements:

1.    Whether the employer had an arguable case;

2.    Where the balance of convenience lay; and

3.    The overall justice of the case.

In this case, the Authority determined that the employer did have an arguable case, dismissing the employee’s argument that the non-compete clause was unlawful.

The clause was clear and narrow in scope, and its time frame was reasonable given the employer’s busy season. The Authority also decided that the clause was necessary to protect the business from potentially losing clients to the direct competitor.

The clause also did not prevent the employee from finding work in a similar industry to the employer, only from working for direct competitors.

The Authority rejected the employee’s argument that because the businesses were physically far apart, they were not in competition. This was because the evidence showed that most sales in the industry were made online and over the phone, irrespective of physical location of the businesses.

The Authority also decided that the balance of convenience lay with the employer. Given the level of customer loyalty in their area of business, the Authority decided that the employee working for a direct competitor could cause the employer serious financial harm. The Authority also decided that if the employer were to seek damages successfully in the future for a breach of the clause, it is unlikely that the employee would be able to pay them.

Finally, the Authority decided that the overall justice of the case lay with the employer. The employee could have advised his employer much sooner of his new employment and the failure to do so is what put the employer in an additionally vulnerable position.

The Authority awarded the interim injunction, preventing the employee from working for any direct competitors for six months.

If you are confused about the contents of your employment agreement, it pays to seek advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Alan Knowsley and Hunter Flanagan-Connors