Employment Spotlight: The Importance For Employers To Seek Legal Advice On Reviewing A Candidate's Post-Termination Restrictions

Introduction

Post-termination restrictions ("PTRs") are commonly found in employee's contracts to restrict the activities of a former employee following termination of his employment. Courts in Hong Kong readily provide judicial relief to those seeking to enforce PTRs so long as it can be shown that the PTRs are (a) reasonable in the interests of the contracting parties and (b) reasonable in the interests of the public.

Please refer to our previous practice note "Employment spotlight: Post termination restraints" here summarising issues relating to PTRs in Hong Kong.

This practice note examines the potential claims and liabilities the recruiting employer ("New Employer") may face on hiring an employee who is subject to enforceable PTRs ("Former Employee").

Potential claims against New Employers who recruit Former Employees who are subject to enforceable PTRs

There are several claims a former employer could potentially bring against a New Employer in connection with their involvement in wrongful conduct by the Former Employee. These could include:-

Inducement of breach of contract: This is where a party knowingly and intentionally procures a breach of contract by another party, and the plaintiff is able to demonstrate that it has or will suffer damages as a result. Causing loss by unlawful means: This is where a party commits an act intended to cause loss to another party which is unlawful and would be actionable if the injured party had suffered loss. Conspiracy: This is where there is an agreement or understanding between two or more parties to injure the plaintiff. In the context of actionable torts in PTRs, this could include:- conspiracy to injure: where the predominant purpose of the agreement is to injure the plaintiff and the plaintiff suffers loss as a result; and unlawful means conspiracy: where the agreement involved an unlawful act which caused loss to the plaintiff. Depending on the facts, these claims may interrelate and overlap. Where it is found that the New Employer has acted unlawfully, it may be held liable to pay damages (including the cost of the legal proceedings).

Seeking legal advice in relation to PTRs

It is therefore important for New Employers to seek legal advice on the enforceability (or otherwise) of the Former Employee's PTRs before making a job offer to the Former Employee.

The significance of obtaining legal advice in relation to PTRs has been highlighted in the recent English decision of the Court of...