Can you restrict a former employee’s use of skills and knowledge after they leave?
A District Court in Hong Kong recently dealt with a case involving post-employment restrictions and confidentiality obligations in the public relations industry. The dispute centred on the enforceability of non-compete and non-solicitation clauses, as well as allegations of misuse of confidential information.
The case highlighted the delicate balance between protecting an employer's legitimate interests and an employee's right to pursue their career.
It raised important questions about the reasonableness of restrictive covenants, particularly for junior employees, and the nature of confidential information in the PR sector.
The employer, a public relations agency in Hong Kong, sought to enforce post-employment restrictions against a former employee who had joined a competing PR firm.
The employer claimed the worker had breached confidentiality obligations and employment agreements by taking up the new role and allegedly soliciting business from the employer's clients.
At the heart of the dispute were two key documents: an Employment Agreement and a separate document titled "Protection of Company Information and Materials". The latter contained a two-year non-compete clause and a non-solicitation covenant of unlimited duration.
These documents were signed on 29 January 2014 when the worker, a fresh university graduate, was offered an entry-level position as a PR assistant with a starting monthly salary of HK$10,000.
The worker argued that these restrictions were unenforceable as they were in restraint of trade. The court had to consider whether the covenants were reasonably necessary to protect the employer's legitimate interests.
The court emphasised that for restrictive covenants to be enforceable, they must protect legitimate business interests and extend no further than reasonably necessary.
As noted in the judgment:
"It is generally recognised that the only legitimate interests which, as against a former employee, an employer is entitled to protect are his trade secrets and customer connections to the extent that the employee may have gained influence over the customers so they would be likely to follow the employee to his new employment."
The court found that the employer had failed to demonstrate any legitimate interest justifying the broad restrictions imposed on the junior employee.
There was no evidence that the worker had access to trade secrets or significant influence over clients that would warrant such extensive post-employment limitations.
The employer alleged that the worker had access to confidential information, including pricing structures and tactical media plans.
However, the worker denied having access to such sensitive information, and the court found no substantial evidence to support the employer's claims.
The employer also claimed that the worker had breached the non-solicitation covenant by contacting a significant client, H&M, and attempting to solicit business for her new employer.
The worker denied this, providing evidence that her new employer had pre-existing relationships with H&M through its international offices.
A key aspect of the case was the employer's claim that the worker had access to confidential information, particularly a "main press list" containing media contacts and internal comments. However, the court was not persuaded that this constituted protectable trade secrets:
"I agree with [the worker] that the contacts of media are public information and different agencies would maintain their own press list; there is in fact an online service called Telum Media which provides access to a database of contacts of journalists and media. And having perused the comments and remarks made by [the employer] on its 'main press list', I think they are far from being able to qualify as trade secrets that would warrant the protection by way of post-employment restrictions."
This finding highlights the challenges PR firms may face in claiming certain industry information as confidential, given the public nature of media contacts and the existence of shared databases.
The court placed significant weight on the worker's junior status and entry-level position when assessing the reasonableness of the restrictions. It noted:
"As a matter of common sense, it is unlikely that she would have access to [the employer's] trade secrets or would have influence over [the employer's] customers that could justify the two restrictive covenants."
This observation underscores the importance of tailoring post-employment restrictions to an employee's seniority and actual access to sensitive information or client relationships.
The court also considered the duration of the restrictive covenant (two years) in relation to the short notice period required for termination (one month), finding this disparity unreasonable.
Ultimately, the court ruled in favour of the worker, finding the restrictive covenants unenforceable and dismissing the employer's claims of breach of confidence. The judgment emphasised several key points:
"I have come to the view that [the employer] has failed to show there is any legitimate interest that would justify imposing the two covenants on [the worker]. In any event, the two covenants are not reasonably necessary for the protection of the interest as identified by [the employer]."
This ruling underscores the high bar employers must meet to justify post-employment restrictions, particularly for junior staff.
"Even if it may be said that [the worker] had learnt from [the employer] the proper way to cater for H&M's needs (ie arranging the participation of suitable bloggers), such know-how cannot be said to be trade secrets belonging to [the employer]."
This statement highlights the distinction between general skills and knowledge acquired during employment and protectable trade secrets.
"[There] is no proposition of law that everything learnt or observed by an operator of machinery during the course of works at a construction site should be regarded as confidential … in general an employee is free to use his skill and knowledge acquired in the course of his employment (as part of his stock in trade) for other purposes after the end of the employment…"
This principle, quoted from a previous case, reinforces the worker's right to use skills and knowledge gained through their employment in future roles.
The case serves as a reminder to employers to carefully consider the scope and necessity of post-employment restrictions, particularly for junior staff. It also highlights the importance of clearly defining and protecting genuine trade secrets and confidential information in industries where much information is publicly available or widely shared.
