14
December
2022

How to win cases relating to ex-employees setting up competing businesses

During a stressful time, Carl Sebastian, Senior Litigation Associate, was the calming, reassuring voice I needed.

Primas Client | Car Finance Lender

At Primas, we’re seeing a rise in injunction cases relating to ex-employees leaving businesses to go it alone.

In some cases, the employee may seek to set up a business that directly competes with the company they previously worked for but often, businesses will have restrictions in place to prevent this from happening.

As a team of litigation experts, we’re incredibly experienced in acting for both the employer and ex-employee in cases like this which means we’re able to use our knowledge of both sides to win.

In this particular case, we were acting on behalf of the individual who had resigned from his previous firm, a national car finance lender, and had set up a competing business. His previous employer had subsequently taken the initial steps to start legal proceedings against his new firm, and with threats of an injunction, the Primas team stepped in to help.

Can an employee set up a competing business?

If an employee wants to leave their current job and set up a competing business, they must first check their contract of employment, particularly whether there’s any restrictive covenants which limit the employee over a certain time period including the non-compete clause.

These simply protect the employer’s commercial interests, particularly when the employer might have had access to confidential information or forged client relationships they can use to their advantage at a later date.

In this case, our client was indeed subject to restrictive covenants. He had no ill-intent with the launch of his own business but found himself in a situation where his ex-employer had started writing to lenders (potential clients for his new business) to urge them to avoid working with our client.

The injunction application

We were now in a position where our client’s ex-employer had made an application to obtain an injunction against his newly set up business.

We’d made sure our client had offered his previous firm everything they were contractually entitled to, an offer which we knew from previous experience was a lot stronger than what they’d get in court. However, our client’s previous firm wanted to take this further and so we advised him that we were in a strong enough position to take the matter to court.

In court, it came to light that our client’s previous firm simply hadn’t been fully prepared before applying for injunctive relief and their application didn’t stand up in front of a Judge. And so, our team of lawyers were subsequently able to successfully defend our client’s case, recovering £21,000 in costs.

Our client had also by this point been relieved of his restrictive covenants and was able to continue with the growth of his newly-launched business with no restrictions and limitations.

Our client said:

“During a stressful time, the Primas team were the calming, reassuring voice I needed. It’s very clear that their team of lawyers are highly experienced in cases like mine, and were able to closely predict the outcome of the case before we went to court. They completely understood my position and represented my business with composure and confidence.”

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If you’re facing a similar challenging situation, get in touch with Carl Sebastian today: carl.sebastian@primaslaw.co.uk

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