April 2024

The recent decision in Manulife Financial Asia Limited and Kenneth Joseph Rappold & Others [2024] HKCFI 989 revisits the enforceability of a non-compete clause in an employment contract. The plaintiff seeks to obtain an interim-interim injunction by virtue of a non-compete clause in the relevant employment contract (“NCC”) in these wordings:

“You agree that you will not at any time during your employment with the Company and for a period of 12 months following a voluntary termination of your employment, be employed in a Similar Capacity by a Competitor,………..without the Company’s prior written consent.

“Similar Capacity” means the same or similar position, or having the same or similar responsibilities, accountabilities and duties that you have or had in connection with your employment with the Company.

A “Competitor” is any person or company engaged in or planning to engage in business that: (1) is the same or similar to the business of, in whole or in part, to those of the Company ……… and its affiliates and subsidiaries, including without limitation providing financial protection, wealth management, asset management and other financial products and services; or (2) involves the selling or offering of products, processes, programs, or services that are the same or similar, in whole or in part, to those of the Company ……… and its affiliates and subsidiaries or that were under active consideration by the Company ………. and its affiliates and subsidiaries during your employment with the Company.”

The NCC is for 12 months of a worldwide nature to restrain a former chief financial officer of the plaintiff from being employed as a chief strategy and transformation officer of a competitor. The plaintiff points to the words “similar capacity” and “competitor” and the high risk of leakage of confidential information by the former senior executive which must be detrimental to the plaintiff’s business interest.

To apply the conventional test of reasonableness versus balance of convenience to determine the enforceability of the NCC, the court refused to grant the injunction pending full trial and observed that the worldwide nature of the NCC is a “remarkable feature” which warrants proper justification and further, the plaintiff has to show why a global restraint is reasonable or necessary to protect the plaintiff’s commercial interest.

The decision reminds the importance of serious and scrutinized drafting of a non-compete clause in an employment contract as it will always be strictly construed by the court.