Where an employee is constructively dismissed, the employer will be in repudiatory breach of the employment contract and so will have no right to enforce a contractual restrictive covenant.
Is it constructive dismissal to invite the employee to a meeting to warn him that a proposed restructure would put him at risk of redundancy and then ask him not to come into work nor contact any clients? In Romero Insurance Brokers v Templeton, the High Court held that it was not.
In this case, the outcome of the meeting was that the claimant elected to negotiate a redundancy package including the sale of his ‘book’ of business. In those circumstances, the employer had acted reasonably and was not in serious breach of contract.
This meant that the Court could go on to consider whether a 12- month non-solicitation covenant was valid. The restriction prevented the claimant from seeking to procure orders from customers with whom he had had dealings over the previous 6 months. The court accepted evidence that a 12-month restriction on individual brokers was common in the insurance broking business and upheld the covenant.
Points to note –
- An employee can only claim constructive dismissal if his employer has ‘clearly shown an intention to abandon and altogether refuse to perform the contract’.
- A non-solicitation covenant is more likely to be upheld than a non-compete covenant but acts of solicitation may be harder to identify.