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Archive for March 21st, 2012

The High Court has ruled that it is for an employer to show that a former employee has solicited former clients in breach of a non-solicitation clause.

The claimant company, in this case, took over the business of another company. Following the takeover a number of the employees left and joined a rival business, and in due course a large number of the company’s clients followed them. This led to the claimant trying to enforce non-solicitation clauses contained in the employees’ contracts of employment.

The Court, in giving judgment, said that a non solicitation clause means that: “ex-employees must not directly or indirectly request, persuade or encourage clients of their former employer to transfer their business to their new employer”. The question the Court had to decide was whether the company was able to demonstrate that one or more of the employees had in fact asked, persuaded or encouraged the clients to move with them.

There was no first hand evidence showing that the employees had requested, persuaded or encouraged the clients to follow them. The Court said that fact that a large number of clients had tried to follow the employees did not in itself prove that they had been solicited. This, the Court said, could simply have been out of a sense of loyalty to the employees. In fact the Court found that the new employer had taken considerable care to ensure the employees recognised their obligations under their restrictive covenants and complied with them.

Accordingly, the Court held that there was insufficient evidence to show breach of the non-solicitation clauses. It did not follow that the move of a large number of clients could never show breach but it would be up to the employer to prove the solicitation. In this case they were not able to do so in spite of cross-examining their former clients with all the awkwardness this involved.

Case reference: Towry EJ Ltd v Barry Bennett and others

Employers should be wary of bringing claims for breach of non-solicitation clauses unless there is clear evidence that solicitation has taken place. Non-dealing restrictions may be easier to prove.

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