Preparatory competitive activity during employment

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In the case of Imam-Sadeque v Bluebay Asset Management (Services) Ltd [2013], the High Court considered whether an employee had acted in repudiatory breach of his employment contract and a compromise agreement by carrying out preparatory competitive activity, with the result that he forfeited entitlement to unvested awards under deferred incentive plans.

The employee decided to leave the company after he did not receive a promotion. He negotiated a compromise agreement with the company, which treated him as a ‘good leaver’ under deferred incentive plans, provided he complied with the terms of the compromise agreement and employment contract. As his employment was terminating before the vesting dates for the awards under the deferred incentive plans, his entitlement to these unvested awards depended on whether he was a ‘good leaver’ or a ‘bad leaver’ under the plans. If he was a ‘bad leaver’, he would forfeit his entitlement.

Unbeknownst to the company, at the time the employee signed the compromise agreement he had agreed to join a start-up organisation that would compete with the company. He started working for the competitor organisation after his employment ended…

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