Mercedes are taking legal action against an engineering employee after he allegedly searched and saved Mercedes race data in preparation for his move to rivals Ferrari.
Benjamin Hoyle currently works forMercedes AMG High-Performance Powertrains, engine manufacturers, however, he was set to leave the company to move to Ferrari at the end of 2015. A Mercedes team spokesperson has said:
"The company has taken the appropriate legal steps to protect its intellectual property,”
Mercedes are taking legal action to ensure the intellectual property allegedly taken by Hoyle is returned, but also to prevent Hoyle moving to Ferrari or any other F1 rival until after the 2016 race season and reclaim their legal fees. But can they do it? Today at Unlock the Law we take a look at the legal reasons Hoyle may be presented to moving to Ferrari.
Restrictive Covenants in Employment Law, UK
Every business has important information and processes it needs to protect from its rivals, and may deem this information and secrecy as integral to the success of the business.To this end, restricting the use of secret information by employees after their employment has ended is an essential part of successful business practice. In fact, competitors often seek to recruit their rival’s employees on the basis of the information they could bring with them - and that is why the law provides protection for businesses facing this situation.
An employer may protect this valuable information both whilst the employee works for the business and also after they have left through a contract term known as a restrictive covenant. The clauses are often used by employees from the outset of an employment relationship to protect information and also to deter employees from joining competitors.
A restrictive covenant is a clause in the employment contract that prohibits an employee from competing with their employer for a certain period after they have left the business.
To be enforceable such a restrictive covenant must be:
• Designed to protect legitimate business interests
• Extended no further than is reasonably necessary to protect those interests
If both of these criteria are satisfied, the covenant will be upheld by the court and enforced against the employee.
There are some types of restrictive covenants designed to protect the employer's business interests in different ways. The start types used are:
Non-competition covenants - this is where the employee is restricted from working in similar employment for a competitor
Non-solicitation covenants – this is where the employee is restricted from seeking out customers or clients of the former employer.
Non-poaching covenants – this prevents an employee poaching former colleagues.
For a restrictive covenant to be enforced, it must not be drafted too broadly. If challenged, the employer must prove that the clause is sufficiently justified and narrowly drafted.
An interesting aspect of restrictive covenants is garden leave, which is often used in conjunction with the covenant. Garden leave is where an employee must spend all or part of their notice leave away from the workplace but not working for their employer. They will still be paid and receive all of their usual benefits but will not be able to access trade secrets of their former employer or work for their new employer. Garden leave must be specified in the employee's contract of employment to be enforceable.
What happens if a restrictive covenant is breached?
The normal remedy for a breach of restrictive covenant is an injunction(interdict in Scotland). Where an employer believes a restrictive covenant has been breached, they can make an application for an injunction and request that the employee hand over or destroy any confidential information immediately, before the court makes a decision. The employer may also make a claim for damages where they can prove they have suffered loss as a result of the breach of restricted covenant.
Read our employment law guides for more info.