Out-Law Guide 7 min. read
02 Nov 2007, 8:31 am
Symbian v Juha Christen Christensen
Mr Christensen was employed from June 1998 as an employee of Symbian Ltd. He became an Executive Vice President of Sales and Marketing of Symbian as well as being a director. Symbian was formed as a result of a joint venture between Psion and four other companies, and the main purpose of the joint venture was to develop and operate “wireless information devices” (WIDs), largely high technology mobile phones, to be used in conjunction with a Symbian software platform known as EPOC. The WIDs and the EPOC system in basic terms constituted “front-end” applications and platforms. Symbian did not deal with the development of “back-end” computer systems which would serve the front-end applications and platforms. Microsoft did deal in back-end software and operated a rival platform to the Symbian EPOC software known as Windows CE. However, it appears to have been accepted in this case that there are close practical links between front-end and back-end software, as it is difficult to operate the one independently of the other. Therefore, it was accepted that although Symbian and Microsoft were not competitors in terms of back-end software, they were competitors relating to other products.
Mr Christensen’s employment contract contained a six month notice period. In March 2000 he gave notice to Symbian that he wished to leave. He did not give the full six months’ notice. Symbian learned that Mr Christensen intended to go to work for Microsoft. Mr Christensen considered that Microsoft was not a competitor of Symbian. Nevertheless, Symbian applied for an injunction from the High Court which, in essence, would prevent Mr Christensen from being employed by or providing advice to any present or intended future competitor of Symbian and from acting in breach of implied duties of good faith and fidelity owed to Symbian during the garden leave period. In doing so they sought to rely on the terms of a “garden leave” clause in Mr Christensen’s contract, and to link it to a further clause which, in essence, stated that Mr Christensen would not be concerned with any competitor or other business, other than the business of the Symbian Group during the course of his employment with Symbian.
Mr Christensen’s contract contained a number of covenants restricting his activities after termination of employment. However, these were not directly relevant to the case. The main clauses under scrutiny were as follows:
“[Mr Christensen] shall not during the term of this Agreement, except as a representative of the Group or with the prior consent in writing of the Board, such consent not to be unreasonably withheld, be directly or indirectly engaged or concerned or interested in any capacity in any trade, business, or occupation whatsoever other than the business of the Company, whether or not competing in any material respect with the business” (Clause 4.3).
Clause 12.3 was the “garden leave” clause and stated:
“the Company may suspend [Mr Christensen] from his duties and not require [Mr Christensen] to attend his place of work or provide him with any work during the period of notice whether that notice is given by the Company or by [Mr Christensen]. The Company need not give any reason for exercising its rights under this clause, but must provide the remuneration due to [Mr Christensen] during the relevant period of notice. During any period of suspension … [Mr Christensen] must not without the written consent of the Board … contact … any customer or supplier of the Company or other member of the Group.”
The “business of the Group” was defined as the business of “the research development devising writing and engineering, licensing, marketing, distributing and supply of computer software and computer products of all kinds as carried on by the Group from time to time”.
The injunction application was initially heard by the Vice Chancellor, Sir Richard Scott, in the High Court. Sir Richard Scott VC had decided to grant an injunction to Symbian but only in limited form. The decision was that the original terms of the injunction sought were too wide, and that the implied duties of good faith did not apply during the garden leave period because garden leave put an end to the employment relationship for that purpose, although contractual obligations could be enforced if necessary. He held, however, that a limited injunction could be granted restraining Mr Christensen from starting employment with Microsoft alone up to the expiry of the six month notice period. The Court of Appeal was hearing Mr Christensen’s arguments that Sir Richard Scott VC should have held the terms of clause 4.3 to be entirely invalid and that he could not allow that clause to be enforced only in a limited manner.
The Court of Appeal considered that a clause restraining activity during employment is limited by the doctrine of restraint of trade, just as a post termination covenant would be – i.e. they need to be justified so as to be reasonable in terms of the legitimate protectable interests of both parties, particularly in terms of protection of customers and confidential information, and insofar as they are not contrary to public policy.
Further, the Court of Appeal rejected Mr Christensen’s argument that this clause was entirely invalid due to restraint of trade arguments. The clause in itself was justifiable on its face and it made no difference that the company had placed Mr Christensen on garden leave and still sought to enforce the clause. The Court of Appeal then considered whether it was possible to enforce such a potentially valid clause but in a modified manner so as not to be unreasonable. The point was made, and previous cases suggested, that the garden leave clause in itself should not be used to gain an injunction to give an employer any greater protection than would be given by a justifiable and valid restrictive covenant.
On considering the evidence it was noted that given the nature of the Symbian and Microsoft business, Symbian had a justifiable interest in preventing Mr Christensen’s employment by Microsoft during the garden leave period because their business might be damaged. Therefore, although an injunction restraining Mr Christensen from performing any activity in breach of clause 4.3 of the contract would not be possible as it would be too wide, granting an injunction to prevent him solely from working for Microsoft would protect a legitimate interest of Symbian. On this basis, the Court of Appeal found nothing wrong with the findings of Sir Richard Scott VC and allowed the injunction to stand.
Issues of confidentiality are key in the context of the IT industry and clauses in employment contracts such as in this case are extremely important. Competition is so keen in some sectors of the IT industry with technology moving so fast that much can hang on the outcome of employment litigation such as this.
The doctrine of restraint of trade is well established to bite most readily on the analysis of post-termination restrictions, whereby employees agree not to pursue certain activities once they have left employment. Such covenants often include an agreement not to compete with the business of the company for a certain period of time and in a restricted area; not to solicit and/or deal with customers or suppliers of the company; and/or covenants not to poach categories of employees from the company involved. However, in each case, in order to avoid the clause being struck down as being a restraint of trade, the company will need to prove that it has legitimate interests to protect and that the clause in each case is no wider than is needed to protect those interests. Typically, the main interests are customer connections, confidential information and to a certain extent maintaining an existing workforce. Given the well documented difficulties in enforcing clauses of these types, employers have in recent years included garden leave clauses in employment contracts, whereby during the period of garden leave the employee has been understood to be still subject to the terms of the contract and still an employee of the company with ongoing duties (often both express and implied) not to compete with the interests of the company or to work for others during that period, at least without consent.
However, the Symbian case (which is not without practical and legal difficulty and which may be attacked fairly heavily in the future) seems to suggest that employers will need to review their strategies in assuming that they can rely heavily on the effectiveness of garden leave clauses. The main reason is it seems clear from the case that a court will apply similar public policy questions to injunctions relating to activities during the garden leave period as they will to post-termination restrictions and employers will need to show the existence of legitimate interests to enforce the restrictions during employment.
However, in one practical sense the manner in which a court will review post-termination restrictions, and restrictions which restrain an employee during the employment contract seem to be different. It is well accepted that a court will not re-write a post-termination restriction. It will allow the deletion of certain parts if the remainder still makes sense. However, it will not reconstruct the clause or “whittle it down” and so, for example, if a post termination restriction prevents competition within ten miles of an office, the court will not insert five miles instead. Nor will it change a restriction for one year after termination of employment to a restriction for six months. Instead, the court will simply say it is too wide and the whole clause is invalid and unenforceable. However, from the Symbian case it does appear that the court is entitled to dilute a “during employment” clause so as to make it reasonable. This is how the court was able to turn a restriction concerning employment by any company into a covenant solely restricting employment by Microsoft.
There have always been arguments that the implied duty which is upon an employee to act in good faith towards an employer can be construed in a limited manner (e.g. treating a general duty as a duty not to work for a single contractor) but in the Symbian case Sir Richard Scott CV said that this implied duty does not continue to run during a garden leave period. This, with respect, does seem fairly astonishing and must be open to attack.
However, beyond the peculiarities of the Symbian case, the clear lesson is that employers will need to review garden leave clauses to ensure that specific contractual duties of the employee are clearly stated to continue running during any garden leave period.