Qantas, Virgin Australia end legal battle over defecting executive

The dispute revolves around the role of non-compete clauses in contracts

Qantas, Virgin Australia end legal battle over defecting executive

Qantas and Virgin Australia have put an end to their legal dispute involving an employee who jumped ship from one company to the other. The employee at the centre of the conflict is a former Jetstar Japan CEO, who held a senior role at Qantas Loyalty, before moving to Virgin Australia to work as the CEO of its loyalty programme, reported the Australian Aviation.

His transfer descended into a legal dispute, in which Qantas succeeded in delaying the executive’s starting date to September 2021, months after his original first day with Virgin. The former CEO has since began his role after the court-mandated delay, and a little over a year after his first day, both airlines announced that they’re walking away from the legal battle.

Read more: Courts increasingly upholding non-compete clauses

Qantas, in a statement quoted by Australian Aviation, said it was unfortunate the matter had to go to court, but stressed that the restraint period was "effectively served through the process." Virgin also said that the settlement has the parties "paying their own costs and payment of any damages."

Non-competes in contract law

Non-compete clauses, one of the restraint of trade clauses, are usually imposed to prevent an employee from joining a competing employer after the period of termination is over. Its goal is to protect the interests of the former employer.  Microsoft previously announced that it’s scrapping its non-compete clauses for employees, except for senior leadership, to enhance the company's workplace culture.

In Qantas' case, the airline argued in court that the employee had "highly sensitive" information that he could take to Virgin with him, which is why it wanted the court to enforce a 10-month non-compete clause.

Read more: Hefty penalty for workers who breached non-compete clause

Shivchand Jhinku, Herbert Smith Freehills partner, previously explained to HRD that such restraints are reasonable when the terms of the contract are clear and were signed in good faith by the parties involved.

"The biggest obstacle that employers face is the cost of seeking to enforce restraints, both in terms of legal fees and management time. Practically, an employer has to weigh up whether it is worth expending the time, effort, and money in commencing legal proceedings, or to instead direct those resources towards retaining business and clients," Jhinku.

He stressed that the court should always be a last resort, nothing that such action does not guarantee success.

"There are many ways that an employer can come unstuck in trying to enforce a restraint, and so it is important that they get legal advice early to develop a strategy and be willing to be flexible as the matter develops," he said. 

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