Press statement undermined non-solicitation clause, rules High Court

The High Court has allowed a claim to enforce a non-solicitation covenant against a former employee to proceed to trial. The case highlights a potential trap for employers who make announcements about new joiners and their client base. The case is interesting because of the indirect nature of employee’s actions – a press statement from the new employer rather than anything the individual did himself. So, a general announcement by the new employer which may previously have been thought to be safe may, in light of this ruling, carry a risk of being an act of solicitation. We’ll speak to an employment lawyer about this case generally and that risk in particular. 

The facts briefly. The Claimant, X-R Touring LLP (‘X-R’) is a concert booking agency for artists in the music industry. It formerly employed the First Defendant, Joshua Javor, who left X-R to work for a competitor, ‘WME.’ At the centre of the case was a 12-month non-solicitation clause in Javor’s employment contract which covered staff, clients, and entertainment artists. On 16 May 2023 he informed the directors of X-R that he had decided to leave, confirming this in writing the following day and the following day he signed a contract with WME. At the end of his 3-months’ notice period, on 16 August, the new employer, WME, released a press statement announcing that Mr Javor had joined the agency’s London office. It referred to many of the artists with whom Mr Javor had previously worked, including household names Coldplay and Eminem. On 6 September 2023 X-R brought a claim seeking declaratory and injunctive relief to enforce the non-solicitation clause.

The High Court decided that the question of whether the non-solicitation covenant was enforceable as a reasonable restraint of trade should proceed to trial on the basis that there was a real prospect of X-R establishing a breach of the clause at the trial. A number of evidential factors pointed in that direction including Javor’s keenness to leave X-R and his reluctant behaviour towards the end of his employment with X-R but a key factor was the press statement released by WME announcing his arrival at their London office and listing some of the clients with whom he had worked. The Court thought that the press release ‘crossed the line’ from a general appeal for custom to a specific appeal to clients of X-R to transfer their business to WME. The High Court took the view that even though it was WME’s statement it could, indirectly, amount to a breach of Javor’s non-solicitation clause.

So, let’s get a view on the case. Chris Evans is a restrictive covenants expert and earlier he joined me by phone from the London office. I put it to Chris that it is the indirect nature of the breach which is the interesting feature of this case: 

Chris Evans: “Correct, and I think it's going to give employers who lose employees a further angle, particularly under restrictive covenants, to seek to enforce them and it will be certainly something that lawyers will be looking at going forwards as to what is the nature and content of any announcement to market in terms of any new employee being recruited. What was interesting was that the court seems to suggest here that there wasn't a need, and I think they use the words ‘specific and direct’ appeal, and it was the nature of the language used specifically in this case, they said that the individual had joined when I think he was joining in a couple of days’ time. Also, the fact that they were talking more widely about the nature of the clients that he was involved with, the high-profile nature of those clients, such that actually that could have amounted, or could amount at full trial, to solicitation of those clients, albeit through this announcement that he is joining the new firm. So, I think it will give a huge amount more scope for employers who are losing employees to potentially look to enforce covenants going forwards.”

Joe Glavina: “Of course, PR departments will often release a press statement when an important new recruit joins the business but this case rather illustrates the problems you can run into and why it is crucial for HR and legal to in the loop, checking the wording carefully.”

Chris Evans: “Agreed and most high-profile individuals who are moving organisations will have publicly available information as to which clients they ask for and as a result of that it won't be uncommon for press statements to be made about x person joining y organisation and he, or she, having previously worked with given named clients and I think what this case demonstrates is that could potentially cause problems going forwards because, as you rightly point out, this is not just a case of a more general statement about the individual joining, it's almost a targeted attempt to encourage those clients to move across to the new employer. It’s a turn in the case law, in my view, that actually this is going to be something that employers and lawyers, more specifically, are going to be looking at. If they do get a query through as to, you know, we've got this high profile, high earning, individual moving from one employer to another, looking at the press statement is certainly going to be one angle that lawyers are going to be looking at in the future alongside the enforceability of the restrictive covenants which would be the typical way that you would approach this.”

Joe Glavina: “What’s your advice, Chris, to the new employer who is inheriting the senior executive in terms of what goes into the press statement? So, whether there’s a non-solicitation clause lurking in the contract of employment needs to be factored in, I guess?”

Chris Evans: “Yes. I think there are two issues really. I think, firstly, you need to do what we would traditionally always do, which is look at the enforceability of the covenants and how well they're drafted. If the covenants are not well drafted a new employer may take the view that actually we are just going to proceed on the basis of those covenants are not enforceable. However, if there is a risk that they are enforceable, or it is at least arguable, I think what the HR and the press team are going to have to do going forwards is ensure that the press article around any individual joining is not drafted in such a way that it's being seen to effectively encourage the client list to move across. This was a case of solicitation rather than necessarily just dealing, which are two very different concepts. So dealing, as you probably know, is all around, you know, even if they approach you, you're not allowed to deal with them, where solicitation is you are actively going out to solicit that business. This was an instance of the restriction being a solicitation clause and notwithstanding that this was just a press article, it was still found to potentially be solicitation given the nature and extent of the content of the of the press article. So I think realistically, for HR teams going forward, there'll be two things to do. One, look at traditional restrictive covenant analysis, but two, if there is an argument they're enforceable, ensure that all other teams within your business are aligned that we can't go too far otherwise there is a risk here that this would be seen as solicitation.”

Joe Glavina: “On the drafting of non-solicitation clauses, Chris, this case suggests you need to cover the employee’s actions whether they be direct or, as in this case, indirect?” 

Chris Evans: “Yes, I think it is important that that language is included. It is obviously a balance between ensuring it's not too wide such as to be likely unenforceable but at the same time what you don't want to happen, as is very much the case here, that you have a new employer that puts out a press statement, for example, that is very wide, is going to be seen by a significant number of people, and effectively encourages the client list to come across, albeit it doesn't expressly state that. I think what was really interesting to me, though, from this case was around the solicitation of employees and how the court potentially would interpret that. One of the points that was flagged by one of the counsel in the case was how it talks around how they must not solicit any employees but not restricting it to a particular type of employee, i.e. a seniority level, or similar, the argument being that that could potentially cover people all the way up from CEO all the way down to those who clean the offices. I think what is interesting, though, is the court said, well, there is an argument that, actually, a court at full trial will interpret the word employees as being equivalent to Mr. Javor who is the individual in question here. So, it gives a kind of an escape route, if I can put it that way, that even if the drafting is not as tight as perhaps we would want, the courts may actually look to interpret the language to allow the definition of employee to be those at a commensurate level and that's not something that I expressly seen to date.”

That case is called X-R Touring v Javor and is a decision of the High Court. We have included a link to the judgment in the transcript of this programme. 

LINKS
- Link to judgment: X-R Touring v Javor