If your employment contract said you had to tell your employer if you were approached by a competitor, would you? Of course not! (Except, perhaps, as a tactical move to prompt a counter-offer). Such a provision couldn’t possibly be enforceable could it? It couldn’t lead to an injunction, could it? Could it?…

A provision such as this was considered by Jack J in the 2010 case of Tullett Prebon v BGC in which he said that, although there was nothing wrong with an employee responding to an approach from a competitor, “If his contract obliges him to report that approach to his employer, in my judgment he is obliged to do so.”  He went on to say “I do not consider that such a provision operates in restraint of trade… Some brokers are very happy to inform their employer, because if the employer values the broker, he is likely to make a counter-offer. So the system works…”

In my view, most employees would not see it that way; until the employee is certain that an offer is sufficiently firm and capable of acceptance, they will be wary of alerting their employer to the fact that they are even considering leaving – delicate nuances of trust may be broken; they may be put under pressure to make a decision; they may even be sidelined or dismissed for disloyalty.

In many cases, breaching this rule is unlikely to lead to any loss for the employer. However, in a 2015 case, Dyson v Pellery, which has only recently been made available because of confidentiality restrictions, the court considered whether such a breach could lead to an injunction.

Dr Pierre Pellery was a junior engineer at Dyson, famous, of course, for making vacuum cleaners and hand-driers.  He was approached by Tesla to work on its electric car project in the USA. The negotiation took a while because of immigration issues. In the meantime, Dyson reassigned Dr Pellery to its secret ‘Project E’ – working on an electric car. Dr Pellery did not tell Dyson that he was considering leaving in order to work on Tesla’s electric car. Had he done so, Dyson would not have let him join the Project E team.

When he eventually resigned, Dyson sought an injunction to prevent him working at Tesla. This was primarily based on his one-year non-competition restraint but, if that failed, on the grounds that, in breach of contract, he had failed to disclose the approach by Tesla and the court should deny him the competitive ‘springboard’ he had gained through learning details of Dyson’s electric car plans.

The judge granted the injunction to observe the non-competition restraint and thus did not have to consider the issue of a springboard injunction. His comments are, therefore, technically ‘obiter’ and will not bind a future court. Nevertheless, he said that, had he needed to, he would have granted an injunction on this basis.

It might be thought that Dyson informing Dr Pellery of a top-secret project is the type of circumstance which would not come up often.  I am not so sure. Many business could say that they would not have told a departing employee certain information had they known he was in talks to join a competitor.

It might also be thought that most employers whose contracts require employees to notify them of approaches from competitors would, like Dyson, also be the sort of employers whose contracts contain enforceable non-competition restraints. Not necessarily so! The decision of Tillman v Egon Zehnder last year has rendered many non-competition restraints unenforceable and, therefore, many employers will be seeking alternative protection.

If you are an employee – don’t assume that these clauses can be safely ignored.

If you are an employer and don’t mind being seen as slightly Big-Brother-like – think about including such a clause, it might help stop your confidential information falling into a competitor’s lap…