What happens when breaches of post-termination restrictions end up in the High Court?
Breaches of post-termination restrictive covenants rarely end up in Court.
But in a recent case handled by Wake Smith’s employment solicitor Charlotte Wallage, the misuse of confidential information was so serious, and potentially damaging, urgent legal action was unavoidable.
Post-termination restrictive covenants and confidentiality obligations are essential tools used by employers to protect their legitimate business interests when an employment relationship comes to an end.
While many contractual obligations cease upon termination, the duty of confidentiality continues indefinitely. These protections ensure that employees cannot misuse sensitive commercial information such as customer lists, pricing strategies, or business plans to the detriment of their former employer.
In this recent matter, our client faced exactly that risk.
Background
The employee in question had been with the company for several years and, by virtue of their role, had significant access to the company’s highly confidential information. This included detailed customer records, sales history, pricing information, and other commercially sensitive material fundamental to the business’s market positioning.
This was the type of information a competitor would find extremely valuable, and exactly the type of information that requires protection.
Following a serious breakdown in the employment relationship, the employee was summarily dismissed for gross misconduct. Shortly after the dismissal, the company was alerted by multiple customers that the former employee, now working for a direct competitor, had approached them in an attempt to secure their business. This prompted an internal investigation.
Discovery of misuse of confidential information
IT analysis revealed the former employee had removed the company’s entire customer list before their departure. Not only had they used this information to target customers in their new role, but there was also evidence the confidential data had been shared with another competitor company.
The potential impact was significant. Loss of customers and the ability of competitors to freely access valuable data posed a material threat to the company’s commercial performance.
While breaches of post-termination restrictions do occur, the scale and seriousness of this misuse made the matter particularly concerning.
Initial Steps: Cease and Desist and Attempts at Undertakings
We were instructed to issue a cease and desist letter requiring the former employee to provide undertakings to:
- Stop using and disclosing confidential information
- Disclose the full list of individuals and organisations they had contacted using the confidential data
- Provide copies of all such correspondence
- Return all confidential information in their possession
Despite multiple attempts to resolve matters amicably, the employee failed to engage constructively and refused to provide undertakings.
Given the growing risk to the business, the company had no choice but to escalate the matter.
Issuing High Court Proceedings: A Rare Step
The company instructed us to take the unusual but necessary step of issuing proceedings in the High Court and seeking an interim injunction.
What is an Interim Injunction?
An interim injunction is a court order granted on an urgent basis to ‘hold the ring’ until the claim is brought before the court. In employment scenarios, this is commonly used to prevent a former employee from:
- Continuing to breach restrictive covenants
- Using or sharing confidential information
- Soliciting or dealing with customers in breach of their contract
Courts only grant such orders where the matter is sufficiently serious, and when damages alone would not adequately protect the business.
Because of the cost and complexity involved, employers typically avoid litigation unless absolutely necessary. However, in this case the risks were too high to ignore.
Collaboration with Counsel and Outcome
Given the strategic and legal complexities involved, we worked closely with specialist counsel to prepare the application and supporting evidence. This collaborative approach ensured that the client’s interests were robustly presented and that the urgent protections sought were achieved.
Ultimately, the parties were able to reach a settlement that was satisfactory to both sides before the matter proceeded to a full hearing. While the company effectively protected its confidential information and business relationships, reaching this point came at a significant cost of over £70,000.
Key Lessons for Employers
This case underscores the importance of:
- Having clear, enforceable post-termination restrictions in employment contracts
- Ensuring employees understand their continuing confidentiality obligations
- Taking prompt action where misuse of confidential information is suspected
While cases of this scale and seriousness are rare, they highlight the real and potentially costly risks that arise when employees abuse their access to sensitive information.
Well-drafted contracts and swift action can make the difference between effective protection and significant and lasting damage to the business.
Your next move?
Employers wanting further information on contracts and protection should contact Charlotte Wallage on 0114 266 6660.
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