Thursday, 23 January 2014

Recruitment Industry - Restrictive Covenants and the Internet

Can restrictive covenants still be enforceable when so much information about candidates and recruiting clients is available on the internet?  Yes, said the High Court in a recent case about the education recruitment market but it has  broader relevance for the recruitment industry.

In East England Schools v Palmer and Sugarman Group Ltd the education recruitment market was said to be “promiscuous”, i.e. with no loyalty between candidate teachers nor schools with the recruitment agencies they deal with. The case highlighted how the internet has profoundly changed the way agencies, recruiters and candidates operate. The question was whether the change has been so dramatic that agencies can no longer claim to have close business connections protectable from recruitment consultants’ activities when they switch jobs.

The High Court Judge hearing the case found that after the defendant employee had moved jobs she had solicited and dealt with (directly and indirectly through her new colleagues) teacher candidates and school clients that she had made connections with whilst working for her old employer. The Judge found her activities to be in breach of  her restrictive covenants.  

However, the employee and her new employer (also a defendant in the case) argued that the restrictions were not enforceable in the first place as the old employer had no property in those connections worthy of protection. This was because the information about candidates and recruiting schools was widely available on the internet and through social media sites. Nor was there any loyalty between candidates and schools to the agencies as they each registered with multiple agencies and shopped around for an agency who could meet their immediate needs on a case by case basis. 

Digging deeper into the workings of the market – important because each restrictive covenant enforcement case is decided on its specific facts  – the Judge recognised that relations between candidates and/or recruiters and recruitment agencies were “fragile” but held that a relationship  between a  recruiter (or job seeker) and the recruitment consultant could still be the deciding factor on who they chose to help make a match. The consultant can acquire knowledge  not publicly available, such as likes and dislikes, special requirements etc. Looking at the particular role and ways of working of the defendant employee and the relationships with the old agency’s clients, the Judge found that she could have such relationships and upheld the restrictions in principle. They were also drafted in a way that was enforceable.  

As a result, the employee and her new employer were ordered to pay damages to the old employer for the catalogue of placements made in breach of the restrictions.