The Court of Appeal has handed down its much anticipated judgment on appeal in Tullett Prebon Plc and BGC Brokers LP - the 'team move' case involving rival inter-dealer brokers.
The background to the case was the departure in February 2009 of ten brokers from Tullett to join BGC. They resigned as a result of a plan by Mr Verrier, former Chief Operating Officer at Tullett, to recruit them soon after he joined BGC in January 2009, after an acrimonious departure from Tullett.
Whilst working out their notice the brokers resigned, claiming constructive dismissal as a result of alleged misconduct by Tullett in persuading them to stay. A claim of constructive dismissal would have meant they were free to join BGC without complying with any contractual restrictions such as lengthy notice periods and post-termination restrictive covenants. The constructive dismissal claims failed before the trial judge. BGC were found to have participated in an unlawful conspiracy, inducing the brokers to breach their contracts with Tullett by leaving early without lawful justification.
The Court of Appeal upheld the trial judge’s decision on the constructive dismissal claims. It held that the test is whether, looking at all the circumstances objectively, Tullett had clearly shown an intention to abandon and altogether refuse to perform the contract. Here, the Court found that the trial judge was correct to find that this was not this case – indeed, quite the contrary, Tullett wanted to preserve the employment contracts and strengthen the relationships.
The other issue considered on appeal was in relation to three brokers who were initially persuaded to move to BGC and who signed "forward contracts" (agreements to be employed at a future date when free to do so) but later changed their minds and stayed with Tullett. Before the trial judge, BGC claimed that Tullett had induced these brokers to breach their forward contracts with BGC by terminating them without lawful justification. The trial judge dismissed this claim, holding that the three brokers were entitled to terminate their forward contracts as a result of BGC's unlawful conspiracy to bring about a mass early departure, whether by lawful means or not. The Court of Appeal dismissed BGC’s appeal and held that forward contracts contain an implied term of mutual trust and confidence. BGC had breached this term by their unlawful conspiracy and accordingly, the three employees who decided to stay with Tullett were entitled to terminate the forward contracts.
So the trial judge's decision stands (for further information see the Freshfields briefing from March 2010). In summary, employers are perfectly justified to seek to persuade their employees to stay, even after such employees have signed forward contracts with a new employer. A court will look with scepticism on an employee's claim that he was constructively dismissed, such as to enable him to leave to join a competitor on lucrative terms immediately afterwards. The claim for compensation against BGC is listed for later in the year.