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Non-compete Agreements May Get Tougher to Enforce

A continuing court saga between rival brokers could ultimately determine the extent to which companies in the U.K. can hold departing employees to their non-compete contracts.

  • Joe McGrath

A development in a UK court hearing this week may ultimately make it tougher for firms to enforce non-compete agreements, which are meant to prevent departing employees from starting new jobs under certain circumstances.

Per the development, UK firms may have to prove that certain client relationships were cultivated and developed specifically by a departing staff member while working at the company if the firms are to successfully enforce contracts that prevent employees from taking customers with them when they leave the company. That’s pending the outcome of a continuing high court battle between two of the world’s largest interdealer brokers, ICAP and BGC Partners, which is scheduled for a showdown at the end of the month.

ICAP is trying to enforce a non-compete agreement with Dean Berry, the former head of its Global Broking e-Commerce business, whom ICAP alleges breached a clause in the agreement when he joined rival firm BGC. Berry’s ICAP contract prevented him from approaching former clients with whom he had built a relationship for nine months after leaving the business. It covered all relationships developed in the year before the termination of his employment, according to court documents. Berry’s attorneys argue that ICAP is trying to bar him from speaking with any clients with whom the firm had a relationship — and not just the clients he specifically developed — and that this would prevent him from being able to have a career in the industry.

In Tuesday’s hearing — ahead of the trial, scheduled to start on April 26 — Justice Finola Mary O’Farrell said the onus is on the plaintiff to identify which clients have formed a relationship with the staff member that is leaving. In court proceedings on Tuesday, Berry’s legal team challenged ICAP to prove which relationships belong to their former employee after the attorneys suggested many relationships were, in fact, not uniquely his and were long-standing relationships with other senior directors at the company.

Today, Mrs. Justice O’Farrell told the legal team representing ICAP that the lawyers must hand over details of all expenses and meetings for Seth Johnson, CEO of ICAP’s EBS Brokertec business, and Don McClumpha, deputy CEO of Asia, for the 12 months ending on July 26, 2016. Justice O’Farrell said this would enable all parties to identify the relationships that were formed by the business and those formed specifically by Berry during his time at the firm. Johnson and McClumpha did not respond to a request for comment.

“In my judgment it seems to me that this is a legitimate request from the first defendant [Berry],” the judge said. “It is very much a matter for the [plaintiff] to identify the clients that are alleged to have formed a relationship with the first defendant, and this should be straightforward.”

ICAP will now have to provide the names of the people that McClumpha and Johnson met with over that 12 month period and specify whether the type of meeting was a lunch, outing at a sporting event, or something else. The business will also have to explain how frequently meetings took place.

Melanie Stancliffe, an expert in employment law and partner at British law firm Irwin Mitchell, says the recent trend UK courts has been to avoid enforcing agreements that prevent departing workers from taking new jobs, “as long as there are sufficient protections from clients being solicited away.”

When asked to comment, a spokesman for TP ICAP said, “We do not comment on litigation matters or those of a confidential nature.”

BGC did not immediately respond to requests for comment. Dean Berry and his legal representatives at law firm Doyle Clayton did not immediately respond to a request for comment.