There have been several interesting cases that have made their mark this July. Below is a summary of these recent decisions and what they mean for employers:
1. Non-Compete Clause: Assessed in Light of the Parties' Expectations of Future Promotion
In Egon Zehnder Ltd v Mary Caroline Tillman, Mrs Tillman (T) was recruited into Egon Zehnder’s (EZ) recruitment business in 2004. Whilst taken on as a consultant, T was given a higher salary and bonus than would normally be expected. By January 2009, she had reached the level of Partner in the business. In 2012, she became the co-Global Head of the Financial Services Practice Group. Despite the fact that no new contract had been signed in respect of any of her promotions, when T left the business to go and work for a competitor, EZ sought to enforce the non-compete clause that was contained in her original employment contract as a consultant. It was accepted by the High Court that the six month non-compete provision was no less than was necessary to protect the business when taking into consideration the rapid promotion that was expected for her when she started work. The clauses had therefore been prepared, and accepted, with the expectation (that was supported by evidence) that T's role would include work that would quickly involve greater strategic contribution than that of a consultant.
- This case will be helpful where an employee is recruited with a plan towards promotion to a more senior level, but their contract of employment is not updated as they rise through the ranks. However, it is worth remembering that this case will not come to the rescue of a covenant which was simply not reasonable at the time it was entered into – even where a junior employee has climbed the career ladder and such a covenant would now be appropriate for them.
- Where employers are recruiting employees with a view to rapid promotion, it would be sensible to (i) record the expectations regarding the timeline of promotion and (ii) what the initial role will involve over and above any standard expectations.
- In any event, employers should review restrictions regularly (at least every couple of years) and update them to extend existing provisions where it is clear that an employee's role means that their departure to a competitor would place the business at risk. Keep a record of the reasons why the restrictions were updated to include the types of business in which the employee is involved, the main customers and contacts that they deal with and the rationale for the duration of the restrictions. Generally speaking, it is good practice to review restrictions on a regular basis even if an employee’s role has not changed. It is, normally, better to enter into fresh restrictions with an employee where appropriate (rather than tinkering with existing restrictions). The reason for this is that restrictions must be drafted very carefully if an employer wants to rely on them in the future. If restrictions are reviewed regularly, this gives an employer an opportunity to redraft existing restrictions that may not be enforceable even if no substantial changes are made (but see our comments below regarding the timing of entering into new restrictions).
- Ensure that any amendments to an existing employment contract, or any new restrictions, are accompanied by evidence that the changes are directly linked to a promotion, change of position or pay rise so as to avoid any arguments about lack of consideration. A good time for employers to review existing restrictions is at the point of annual pay reviews, for example. Employers should also seek legal advice to ensure that any amended, or new, restrictions are successfully incorporated into an employee’s employment contract.
2. Whistleblowing: Public Interest Test Given Wide Interpretation
In Chesterton Global Ltd (t/a Chestertons) and another v Nurmohamed and another, Mr Nurmohamed (N) made several complaints to two directors about manipulation of the company's accounts. He asserted that the company was deliberately supplying inaccurate figures to its accountant and overstating actual costs and liabilities, resulting in lower profit-based commission payments for around 100 senior managers (including himself).
When N was dismissed, an employment tribunal found that his dismissal had been automatically unfair as it had been a result of him having made protected disclosures. The tribunal remarked that a disclosure did not have to be in the interest of the entirety of the public; the fact that disclosures were in the interest of 100 senior managers was a sufficient section of the public to amount to being a matter in the public interest.
The Court of Appeal agreed with both the Tribunal and the Employment Appeal Tribunal (EAT), stating the mere fact something is in the worker's private interests does not prevent it also being in the public interest. It will be heavily fact-dependent, but the Court adopted four criteria as a useful starting point to help consider the reasonableness of a worker's belief that a disclosure was in the public interest:
a) The numbers in the group whose interests the disclosure served;
b) The nature of the interests affected and the extent to which they are affected by the wrongdoing disclosed. Disclosure of wrongdoing directly affecting a very important interest is more likely to be in the public interest than a disclosure of trivial wrongdoing affecting the same number of people;
c) The nature of the wrongdoing disclosed. Disclosure of deliberate wrongdoing is more likely to be in the public interest than the disclosure of inadvertent wrongdoing affecting the same number of people; and
d) The identity of the alleged wrongdoer. The larger or more prominent the wrongdoer, the more obviously should a disclosure about its activities engage the public interest, although this principle "should not be taken too far."
- Employers may see a resurgence of claims advanced under the whistleblower legislation following this decision. It remains relatively easy for a worker to demonstrate that they have a reasonable belief that their disclosure is in the public interest in all but the most directly personal of issues.
- The above is especially true given that the Court of Appeal also confirmed that a claimant will not fail the public interest test simply because they do not articulate the reason for their alleged reasonable belief until after the event, as is common. Further, the public interest need not be their sole or even main motivation; a disclosure can still qualify for protection even if the claimant’s motivation for making it is in bad faith (albeit this may affect their level of compensation).
3. Whistleblowing: Tribunal Under Duty to Consider Stigma Future Loss Claim
In Small v Shrewsbury and Telford Hospitals NHS Trust, Mr Small (S) successfully represented himself at an employment tribunal claiming a detriment related to a protected disclosure after his contract was terminated. Whilst he did not make an express claim for 'stigma' damages (i.e. a claim for damages on the basis that he is disadvantaged in the labour market as a result of bringing a 'whistleblowing' claim and having been dismissed because of whistleblowing), the Court of Appeal agreed that it was incumbent on the tribunal to consider awarding such damages following a successful whistleblowing claim. This was the case even if such a claim was not expressly made out. In this claim, there was very explicit evidence pointing to long-term losses.
- This case is a timely reminder, that under UK law, whistleblowers can receive uncapped damages, which could extend to career-long loss. As such, care should be taken to properly deal with and investigate whistleblowers’ complaints. It is important that legal advice is taken before terminating an individual’s contract who has previously “blown the whistle.”
4. Imprisoned for Breach of Court Order
In OCS Group UK v Dadi, the High Court imposed a sentence of 6 weeks’ imprisonment on an employee for breaches of an interim injunction in a dispute over confidential information. Mr Dadi (D) was an employee of OCS, an aviation cleaning contractor at Heathrow. OCS alleged that he had sent its confidential information to his private email, and served an interim injunction on him. Before seeking advice, D committed several breaches of the order, including deleting around 8,000 emails and tipping off others about the injunction. After obtaining legal advice, he then admitted breaching the order and co-operated with OCS in trying (unsuccessfully) to recover the deleted emails.
The court took a number of factors into account in sentencing. In particular, the fact that the breaches were deliberate, had significantly prejudiced OCS and put them to considerable cost in forensic examination to salvage information that should have been left intact. The court imposed what it regarded as the minimum term of imprisonment appropriate in the circumstances. It had regard to each of the breaches, considering imprisonment necessary given the need for continuing compliance with orders in this case, and as a warning to others.
- Although this case is unexceptional as far as the sentence is concerned, it is not often that we see these powers being used in an employment context. It therefore serves as a strong reminder of the importance of complying strictly with interim injunctions aimed at preserving evidence pending trial.