Springboard Injunction for Breach of Notification Term

The High Court held that a springboard injunction was appropriate where an employee breached an express term requiring him to notify his employer of an offer of employment with a competitor. As a result, the employee gained access to confidential information to which he would not have had access if he had complied with the notification term.

This is the first case to give detailed consideration to the enforceability of a notification term, and the appropriate remedy for its breach. The notification term provided as follows:

“You agree that if any person approaches you in connection with offering you employment which is or potentially may be in competition with the Company or any Group Company then you will immediately inform the Company of that approach. In addition, you will disclose to any new potential employer before accepting such an offer of employment the extent of your notice period and the obligations after employment which you owe to the Company and any Group Company and will confirm to the Company that you have provided that notification.”

The facts

Mr Pellerey started work for Dyson in March 2013 as a Motor Drives Engineer, helping to

design the next generation of Dyson’s digital motors for its vacuum cleaners. In November

2014, Mr Pellerey was contacted by a recruiter from Tesla, a leading manufacturer of electric cars based in the United States. Following interviews, in March 2015 Tesla made a job offer to Mr Pellerey of appointment as a Staff Drive Motor Engineer. Mr Pellerey accepted the offer by email and Tesla started the process of applying for a visa for him. While efforts to obtain a visa continued, Mr Pellerey did not inform Dyson of Tesla’s conditional offer or of his acceptance of it.

In May 2015, events at Dyson took an unexpected turn for Mr Pellerey. He and two colleagues were taken to one side and told that Sir James Dyson intended that the Dyson Group should develop an electric car. Mr Pellerey and his colleagues were told that they were to be assigned to this new project which was to be kept confidential and which became known as “Project E”. The judge (Snowden J) accepted that, given Dyson’s view of the commercial sensitivity of Project E, if Mr Pellerey had told his managers at Dyson at the outset that he had accepted a conditional job offer with Tesla and was waiting for visa clearance, he would not have been allowed to become involved with Project E.

In June 2015, Tesla made Mr Pellerey an offer of a job based in Europe, which avoided the problems with his US visa application. Mr Pellerey then handed in his notice to Dyson.

The issues

Dyson sought an injunction to prevent Mr Pellerey from taking up employment with Tesla for a period of 12 months after the termination of his employment with Dyson on two bases, namely (i) enforcement of a 12-month non-compete covenant, and (ii) springboard relief for breach of the notification term.

The judge granted an injunction restraining breach of the non-compete covenant. This Bulletin addresses the judge’s approach to the claim based on the notification term despite his remarks on this issue being strictly obiter.

Construction of the notification term

For the employee, it was argued that the natural reading of the notification term was that it

only applied to a first approach by a potential employer when received and not at a later stage.  The judge  rejected  this approach  as  too narrow.  The  commercial  purpose  of  the notification term was to ensure that Dyson was alerted to any attempt to lure away its employee by an offer of competitive employment, and for the prospective new employer to be informed of the relevant restrictions on employing the employee. That purpose would not properly be served and could easily be frustrated if the requirement for notification was only tested once and for all at the start of what might be a lengthy period over which the job specification  might  change.  The  clause  was  triggered  when  Mr  Pellerey  learnt  of  the existence of Project E, at which stage the Tesla employment on offer was or “potentially may be” in competition with Dyson. [143]-[146].

Was the notification term an unenforceable restraint of trade?

It  was  then  argued  for  the  employee  that  the  notification  term  was  invalid  as  an

unreasonable restraint of trade. The judge held that such clauses are not a restraint of trade. In doing so, he relied on Goulding on Employee Competition, which pointed out that such clauses do not actually limit an employee’s ability to take a new job. In any event, the judge considered it difficult to see why it should be other than reasonable if it operates as an adjunct to a restrictive covenant and/or a confidential information clause. That point was particularly significant in the present case, because the notification term was limited to a requirement to notify Dyson of an approach from a competitor, rather than being a blanket requirement to notify Dyson of all approaches from potential new employers. [147]-[155]

Springboard injunction for breach of the notification term

The judge accepted that in most cases of breach of a notification term simpliciter, it will be

very difficult to see why it would be an appropriate response to restrain the employee from taking up his new employment. But this case was different: Mr Pellerey’s breach of the notification term meant that he learnt of the confidential information concerning Project E that he would not have discovered had he told Dyson of his job offer from Tesla.

In principle, such an injunction could extend until the information ceased to be confidential. However, Dyson did not seek such a restraint, but limited its claim to the same period as its restrictive covenant. There was no obvious logical justification for that concession, but it obviated the need for the judge to enter upon further consideration of the issue. [156]-[160].

The full judgment can be read here. Although decided in 2015, the judgment has only recently become publicly available.