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Lost a Key Employee? This is How to Mount a Damage Limitation Exercise

The shock departure of a key employee is a troubling moment for any business. As a High Court ruling showed, however, effective steps can often be taken to prevent them trailing confidential information and important clients in their wake.

A company that specialised in finding and booking motivational or keynote speakers for corporate events launched proceedings following the resignation of one of its directors. Amongst other things, it alleged that he had, whilst still in its employ, been instrumental in preparing to establish a rival business with a longstanding friend.

The allegations were disputed by the director, his friend and the rival business, but their statement of case was struck out after they failed to comply with a raft of court orders. Judgment having been entered against them on liability issues, the factual basis of the company’s claim was taken as having been established.

The Court noted that the director was subject to a panoply of restrictive covenants in his employment contract which were designed, amongst other things, to protect the company’s confidential information and to restrain him from soliciting its established clients or involving himself in competing businesses for nine months following his departure.

Ruling on the matter, the Court concluded that the company’s loss of one particularly successful speaker was caused by breaches of contract on the part of the director and his friend. Whilst the latter had no written contract with the company, he had worked for it as a sub-agent in circumstances that the company argued gave rise to an expectation of good faith and loyalty. On the basis of the company’s pleaded case, breaches of duty on the part of the rival business were also established.

The Court issued an injunction with a view to restraining any further breaches of the company’s rights. It further awarded the company £220,453 in damages and interest, including £50,000 in respect of interference with its rights in its confidential database of clients and speakers.

3 September 2023
Last Updated
3 October 2023