ELMO Software Ltd (ASX: ELO) shares were on the rise today despite news circulating that the software developer has suffered a setback in a New South Wales Supreme Court case. By the market’s close, the ELMO share price was trading at $5.23, up 3.16%.
In comparison, the All Ordinaries Index (ASX: XAO) closed down 0.63%.
Let’s take a closer look at the Supreme Court decision.
What did the Supreme Court decide?
The Elmo share price finished in the green today despite news spreading that, in an interim decision before the final hearing, the NSW Supreme Court placed a temporary injunction against David McMurchy and Arumugam Kumaran from beginning employment with Breathe – a wholly-owned subsidiary of ELMO.
McMurchy and Kumaran are ex-employees of UK based Peninsula Group company Employsure, and were to join Breathe in the roles of sales manager and sales representative respectively.
Employsure took the matter to court in January, claiming both employees were contractually bound to not seek employment with a competitor. ELMO denies its product is in direct competition with Employsure’s HR and WHS software product, known as Bright.
Mr McMurchy’s last position at Employsure was as sales manager of the Bright product. Mr Kumaran was a senior salesperson.
On 8 February, the court prevented Mr McMurchy from joining Breathe until at least 14 March. On 15 March, the court extended the order for him and Mr Kumaran until a final decision is made. The next hearing is expected to take place in April 2021.
Employsure also indicated it is highly likely to begin proceedings against a third employee, who is planning a move to ELMO.
Words from the parties
In a statement, a spokesperson for Employsure said the decision was welcomed.
The decision vindicates Employsure’s efforts to protect its legitimate business interests, particularly relating to its software product Bright, which were being threatened by the ex-employees and ELMO, despite requests for them to refrain from doing so.
More fundamentally, the decision shows that it is possible to protect against underhand behaviour from ex-staff and competitors, including preventing against the solicitation of colleagues and removal of confidential information, supporting that contractual commitments protecting against such actions are an important foundation for business.
ELMO declined to comment as the case is still before the court.
ELMO share price snapshot
Over the past twelve months, the ELMO share price has gained around 22%. In comparison, the S&P/ASX All Technology Index (ASX: XTX) is up 117% over the same period.
Based on the current ELMO share price, the company has a market capitalisation of around $452.4 million.
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Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia has recommended Elmo Software. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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