This is the final article in our employment series: breaking down the employment contract. We look back over the significant contract cases of the year as well as looking forward to the next big change in store for employment contracts.

Implied term of trust and confidence

An alleged breach of the implied term of trust and confidence is a common ground for bringing an employment tribunal claim and this year is no different.

The case of Agoreyo v London Borough of Lambeth is an important one for employers, as the Court found that the suspension of a teacher on the basis that it would allow for a misconduct investigation to be carried out fairly constituted a serious breach of the implied term of trust and confidence.

This was based on the fact there was:

  • no evidence of any attempt to ascertain the employee's version of events prior to taking the decision to suspend her;
  • no evidence of any consideration of alternatives to suspension; and
  • no explanation in the suspension letter as to why an investigation could not be conducted fairly without the need for suspension.

These factors led to the conclusion that suspension was adopted as the default position and was "largely a knee-jerk reaction". This case reinforces the great care an employer must take when considering whether to suspend an employee in the wake of alleged misconduct.

Implied terms v express terms

Two cases this year have focused on whether it is necessary to imply a term into an employment contract, in order for it to properly reflect the parties' intentions.

In the case of Irish Bank Resolution Corp Ltd (In Special Liquidation) v Camden Market Holdings Corp, the Court of Appeal confirmed that the starting point when considering the existence of an implied term to give effect to the parties' intention is to look at the express terms of the contract. The implied term being sought must not contradict any express term. In this case, the express terms of the contract allowed for the bank to disclose information regarding a loan and therefore the court found there was no implied restriction and the bank was free to disclose information on the loan to potential purchasers, notwithstanding that this was might impede Camden's own marketing of the property to which the loan was attached.

The case of Ali v Petroleum Company of Trinidad and Tobago also looked at the issue of implied terms. Mr Ali took a living allowance loan from his employer, Petroleum, who agreed to waive repayment of the loan on Mr Ali attaining five years' service. Before the five years were completed, Mr Ali volunteered for redundancy. He then tried to claim that he had been prevented from attaining the necessary service by Petroleum, as a result of which the loan repayment should be waived. The court held that there was an implied term that Petroleum would do nothing of its own initiative to prevent Mr Ali from providing five years' service and that if it did, the obligation to repay the loan would be waived. This was necessary to make the contract for the loan and its repayment terms work. However, there was no implied term preventing repayment of a loan in a voluntary redundancy situation where Mr Ali had freely volunteered to be dismissed.

The case of Newcastle upon Tyne NHS Foundation Trust v Haywood considered whether a contractual notice of termination takes effect on posting, delivery or communication of the contents of the notice, where there is no express term in the contract of employment specifying when such notice is effective. It was held that, in the absence of an express contractual term, the notice takes effect from the date it is actually received by the employee, in the sense of them having personally taken delivery of the letter containing it. For a more in-depth consideration of this case see our article When does notice of termination of employment take effect?

Restrictive covenants

We have also seen significant case law developments this year in the area of restrictive covenants. The case of Tillman v Egon Zehnder Ltd considered the validity of a non-compete restrictive covenant which did not contain a provision permitting the employee to hold a minor shareholding in a competing business after termination. The Court of Appeal found that in the absence of such wording, the non-compete restriction was impermissibly wide, and therefore void.

In Egon Zehnder Ltd v Mary Caroline Tillman, the High Court considered that the reasonableness of a non-compete clause should be judged at the point in time when an employee enters into the restrictive covenants. The court accepted that the employer in this case had legitimate business interests that needed protection, namely client and candidate connections as well as company, group and client confidential information. The court also recognised that Mrs Tillman had entered into those covenants when she was a junior consultant, even though she had been promoted to a very senior role by the time of termination of employment. However, the Court did not accept Mrs Tillman's submissions that she was a normal" consultant and instead found that, on the evidence, she was "a bit special". As the parties had high hopes for Mrs Tillman's future, and given her previous experience, the court found that she had more client engagement and made a greater contribution to strategic matters, as matter of fact, than would otherwise have been expected from a consultant. This was likely to have been anticipated by the parties from the outset and, on this basis, the covenant could be enforced.

For practical tips on what to include in restrictive covenants see our previous articles Employment series (2): breaking down the contract and Employment series: Breaking down the employment contract.

The next big thing

Next year is all about the General Data Protection Regulations (GDPR). The GDPR will introduce a higher hurdle for obtaining consent to process personal data, as a result of which the usual blanket consents in employment contracts are unlikely to be effective.

For many employers this will require significant changes to be made to their existing employment contracts, as they move away from relying on consent as the basis for lawful processing of personal data. Now is the time for employers to review and update their contracts of employment.

For more information see our previous article.

Next year

Next year look out for our series of monthly articles focusing on employment policies, in particular considering which are essential and which are nice to have as well as highlighting key drafting tips to avoid common pitfalls.