An employee who had been employed as a sales manager in a company producing addition agents to the food industry terminated his employment.
Shortly before, the employee had copied a substantial number of documents containing confidential information on the company's customers and recipes. The employee had also contacted several business connections using his private e-mail.
INJUNCTION AGAINST COMPETING BUSINESS FOR THREE YEARS
When the employer found out about this, an injunction was issued (based on the previous rules) prohibiting the employee from being involved with the employer's addition agents for three years from the effective date of termination.
Subsequently, proceedings were commenced concerning the validity of the injunction and a claim for compensation was made against the employee due to the company's loss.
THE INJUNCTION WAS TOO FAR-REACHING
The Supreme Court found that the employee had obtained access to the company's business secrets contrary to the Marketing Practices Act. As it should be considered likely that the employee would use or disclose the confidential information, there were grounds for the issuing of the injunction.
However, the Supreme Court found that the injunction was too widely worded as it did not only cover the addition agents to which the company owned the recipes or the company's customers. According to the injunction, the employee was also prevented in general from being involved with addition agents with which he had been involved before he became employed with the company.
The Supreme Court attached importance to the fact that the injunction implied that the employee was prevented from carrying on competitive activities even though he had not been covered by a non-competition clause.
As the injunction in terms of content and time went beyond what was necessary in order to safeguard the company's interest in protecting its business secrets, the Supreme Court ruled that the injunction should cease.
The Supreme Court also found that the company had not suffered a loss in connection with the employee's actions, and the claim for compensation was dismissed.
AN INJUNCTION MUST BE PROPORTIONAL TO THE INTEREST TO PROTECT
The Supreme Court would presumably have reached a different result if the injunction had been less extensive vis-á-vis the employee's possibilities of taking on another job within the industry, and if the term of the injunction had been limited to a shorter period.
The ruling shows that a very far-reaching injunction will not always be the best means to protect a company's interests when an employee carries on unlawful competing business. It is therefore important that the injunction is not worded wider than necessary in order to protect the company, and that the employee is not in general prevented from taking on another job within the industry.
Further, the ruling also shows that it is important to limit very trusted employees by way of non-competition and non-solicitation clauses as the Marketing Practices Act does not always provide sufficient protection, in particular as regards the financial loss.