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Injunction granted Against Former Employee Enforcing Non-solicitation of Customers Obligation

Sonoma Valley Ltd t/a GSLS issued High Court proceedings against Frances Cahill and her new employer RMS Cash Services Limited in respect of breaches of confidentiality and non-solicitation clauses in Ms Cahill’s contract of employment. GSLS sought and was granted interim and interlocutory injunctions against Ms Cahill forcing her to comply with these contractual obligations. The High Court also awarded costs against Ms Cahill due to her refusal to agree to give undertakings, which would have avoided the litigation.

Facts:

The Plaintiff company, GSLS, acquired another business, TSS, in September 2018. Ms. Cahill was employed for four years by TSS, as it’s Sales Manager, and under TUPE Regulations, her employment transferred to the Plaintiff on 30th September 2018. Ms Cahill had signed a contract of employment with GSLS with more favourable terms on 3rd September 2018 but which also included a confidentiality clause and post-termination restrictive covenants. Ms. Cahill subsequently became unhappy about her title and ultimately resigned on 19th November 2018 without giving any notice. Ms Cahill commenced employment with the Second-Named Defendant company, a competitor of the Plaintiff, in early January 2019.

The Plaintiff became concerned about Ms Cahill using confidential information and soliciting its customers and staff.  Therefore, by letter dated 7th January 2019, AOC Solicitors on behalf of the Plaintiff in this matter,  wrote to Ms Cahill seeking undertakings from Ms Cahill to comply with the obligations in her contract and to cease and desist from soliciting, contacting and/or approaching GSLS’ customers, clients or staff. A letter was also sent to the Second Named Defendant drawing its attention to Ms Cahill’s contractual obligations and seeking similar undertakings to that sought from Ms Cahill.

By letter dated 15th January 2019 Ms Cahill confirmed that she would give the undertaking not to solicit and stated that she had not contacted any customers of GSLS since her alleged constructive dismissal. Ms Cahill also stated that she needed to pay her bills and rent but that the Second Named Defendant would move her to other duties so that she could continue in her employment. On 21st January 2019 solicitors for the Second Named Defendant stated that the Plaintiff had not approached customers of the Plaintiff and agreed that she would not contact them for the restricted period but refused to give any undertakings. The letter also confirmed that Ms Cahill was working in a non-customer facing role.

However, on 11th February 2019, Ms Cahill contacted a customer of the Plaintiff and signed off the email as “Senior Client Relationship Manager”.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Interim relief was granted by Ms Justice Reynolds on the 15th February 2019 restraining Ms Cahill from

  1. disclosing any confidential information obtained by her during the course of her employment with the Plaintiff; and
  2. soliciting or approaching clients, customers of the Plaintiff, in breach of the undertaking provided by the first named defendant on 15th January 2019.

Ms Justice Pilkington granted interlocutory relief in the matter on 15th March 2019 in the same terms as granted by Reynolds J.

Decision:

Pilkington J. applied the three limb test in granting an interlocutory injunction, whereby it must be shown that a) a strong case to be tried b) the adequacy of damages and thereafter c) on the balance of convenience the injunction should be granted.

The Court concluded that a strong case could be established by simply analysing the contract. The Judge noted that the contractual entitlement of the plaintiff was clear in its terms. The contract was freely entered into and therefore both parties were bound by it. The non-solicitation and confidentiality clauses were clear and not unduly onerous, with the limitation period inadvertently having been reduced from 12 months to 9 months due to the fact that the clause stating that the restrictive period ran from the transfer date rather than the termination date in error but which is nevertheless binding on both parties.

On the adequacy of damages, the court was informed by Ms Cahill that her employment was not in jeopardy with regard to any adherence by her to the confidentiality and non-solicitation clauses of her contract with the Plaintiff.  

On the balance of convenience, Pilkington J.  held that the balance was found to be in favour of the Plaintiff, in holding Ms. Cahill bound by her contractual obligations, particularly in a very small industry where Ms Cahill could well have access to sensitive and important client based information.

What is the significance of this decision?

A 9 month non-solicitation clause was only held to be enforceable in this case due to there only being three serious players in the industry in Ireland. Therefore, employers should reconsider the length of the restriction on its non-solicitation clauses and reduce such periods down from 12 months to ensure they are enforceable in the same manner as non-compete clauses. Also, employers should be mindful to check whether new employees are subject to contractual obligations with their former employers to avoid being caught up in a High Court application such as this one.

31st July 2019

Anne O’Connell Solicitors

Fitzwilliam Hall

Fitzwilliam Place

Dublin 2.

www.aocsolicitors.ie

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