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To compete or non-compete, that is the question

| August 21, 2023

A recent High Court decision to refuse an interim injunction to enforce a 12-month non-compete clause in an employee’s contract of employment was down to the employer’s unreasonable delay in bringing proceedings.

Background

Mr Couture was employed by Jump Trading International Ltd (‘Jump’) as a quantitative researcher in algorithmic trading (trading where computers make the final decision) from June 2016 until his resignation, with notice, on 30 March 2022. He was required to give one year’s notice under his contract of employment, and the employer placed him on garden leave for the notice period.

Mr Couture had a non-compete clause in his contract stating that he could not engage in activity with a competitor during a period of between 0-12 months following the notice period or garden leave, which was to be determined by the employer at its discretion within 20 days of termination of Mr Couture’s contract.

Mr Couture accepted an offer of employment by Veriton Advisers UK Partners LLP (‘Veriton’) on 23 March 2022. He handed in his notice on 30 March 2022. Jump placed him on garden leave for 12 months and informed him they would enforce the 12-month non-compete period. This effectively meant that Mr Couture could not work for Veriton for two years. Mr Couture replied to Jump to say this was unacceptable and he would be joining Veriton at the end of his garden leave.

After attempts to resolve the situation, Jump waited a further four months before applying for an interim injunction to stop Mr Couture from joining Veriton.

Mr Couture argued that the uncertainty of not knowing how long the non-compete clause would last, rendered it unenforceable. In any event, it was unreasonably long and too wide in its scope – effectively excluding him from working in the financial services industry at all.

Judgment

The High Court’s decision to refuse the interim injunction was based on Jump waiting nearly five months to bring proceedings, and it ordered a speedy trial to resolve the dispute.

Comment

This case highlights that employers should act without unreasonable delay in seeking an interim injunction against an employee.

Even if the employer succeeds at trial, without an interim injunction, there is likely to be an increase in the business risk, costs, and delays – which could have been avoided if they had acted sooner!

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