Urgent action required to enforce restraint

In a NSW Supreme Court decision, Fairfax applied for an injunction to restrain a former employee from working for Yahoo!7.

The employee commenced with Fairfax in 2009. In October 2011, he was promoted and subsequently signed another contract with Fairfax.  The contract contained a restraint clause that restrained the employee from working for a competitor for 6 months.  It required him to provide 12 weeks’ notice of any resignation.

In December 2013, the employee gave 12 weeks’ notice of his resignation to Fairfax as he had accepted the CEO role at Yahoo!7, to commence in mid-2014.

On 16 December 2013, Fairfax wrote to the employee to remind him of his post-employment obligations. On 19 March 2014, Yahoo!7 responded to Fairfax’s letter and indicated their belief that the restraints in the employee’s contract were not enforceable and that the employee would commence work with Yahoo!7 on 9 April 2014.

On 9 April 2014, the employee did in fact commence work with Yahoo!7. Fairfax ultimately commenced proceedings on 17 April 2014.

Decision

Justice Ball declined to provide Fairfax with injunctive relief in the circumstances, despite acknowledging that Fairfax had a strong case. Most significantly for employers, Justice Ball noted the delay in commencing proceedings:

“… Fairfax is guilty of delay in commencing these proceedings. … In my opinion, there has not been an adequate explanation for those delays. The delays are very substantial in a context where the injunction sought by Fairfax would only last for a period of 7 weeks. In the meantime, [the employee] commenced employment with Yahoo!7. It would be disruptive both to it and to [the employee] to grant an injunction now and, for the reasons I have given, that injunction would do little to protect any legitimate interest that Fairfax has.”

Implications for Employers

This case emphasises the importance of acting swiftly should an employer wish to attempt to enforce a restraint clause in an employment contract. Courts have historically questioned why an employer would delay commencing proceedings of this nature if the breach was serious and arguably detrimental to its business.