01 October 2019 by Lydia Newman
Supreme Court considers restrictive covenant wording for the first time in a century
In the case of Tillman v Egon Zehnder Limited the Supreme Court (SC) considered whether or not words could be removed from a non-compete clause to make it enforceable.
The case was brought by Ms Tillman who argued that a 12 month non-compete clause that did not allow her to be interested in any competing business (including holding a shareholding) was an unreasonable restraint of trade. This was on the basis that she wished to work for a competing business in the field of executive recruitment within the time period. She informed her previous employer of this fact and that she considered that the covenant was void.
The SC agreed that the construction of the clause was unreasonable as set out here:“directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company or any Group Company which were carried on at the Termination Date or during the period of 12 months prior to that date and with which you were materially concerned during such period”.
However, the SC considered that the words “or interested” could be removed and this resolved the unreasonableness of the clause, meaning that the remainder of the clause was enforceable. This overturned Court of Appeal authority that had stood for 99 years. Such blue pencil amendments can be made as long as the removal of the words does not change the remainder of the clause and does not involve a major alteration of the post-employment contractual covenants.
Although the employer was successful in this case the length of time it has taken for the case to be decided has meant that the contractual period of the covenant has long since run out. Whilst the SC ruled in favour of the company the court commented in the judgment that such restrictions could be considered “legal litter” and stated that there may be a “sting in the tale” when it comes to costs. Whilst employers clearly have the right to protect their business restrictive covenants remain a difficult balancing act that can lead to costly litigation should there be a post-employment dispute, even if the business is successful in the end.
In the case of Bilsbrough v Berry Marketing Services it was held for the first time in the Employment Tribunal (ET) that an employee who has researched how to make a protected disclosure but has not actually made one is protected by whistleblowing legislation.
In this case Mr Bilsbrough believed he had identified a security issue in breach of the Data Protection Act 1998 and alerted the technical director in compliance with the company’s whistleblowing policy (as his line manager was not at work). His line manager was affronted by this and told Mr Bilsbrough off, telling him to “engage his brain”. Subsequently Mr Bilsbrough researched how to make a protected disclosure to the information commissioner. He also told a colleague he would ‘bring down the company”. The company did look to make good the issues raised by him.
It came to light what Mr Bilsbrough had said and that he had researched making a protected disclosure to outside agencies. He was dismissed following a disciplinary meeting for gross misconduct.
The ET found that he had been detrimentally treated as a result of making a protected disclosure although he had not been unfairly dismissed.
This case is not binding as it was heard in the ET, however it can be taken into account by other tribunals and has broken new ground in the extent of the protection afforded to whistleblowers. Companies should be aware that employees may have protection from the point of considering and researching making a protected disclosure rather than from the point of actually making a disclosure. Care should particularly be taken if dismissal is being considered as employees who do not have two years’ service may have protection from detrimental treatment and unfair dismissal in any event if they have blown the whistle or considered doing so.
In the recent case of Upton-Hanson Architects v Gyftaki the Claimant resigned and claimed constructive dismissal following a dispute over annual leave. The employer had failed to decide whether the Claimant had sufficient annual leave to take a holiday until late on the day before travel, so the Claimant decided to travel in any event. She was subsequently suspended and brought a claim for breach of the implied duty of mutual trust and confidence.
The employer stated in the ET3 that constructive dismissal was denied and simply stated ‘save as expressly admitted, all the Claimant’s claims are denied in their entirety.’
The employer had therefore failed to identify a potentially fair reason for dismissal and the burden of proof for this is with the employer.
Whilst blanket denials have their place in responses, such as when claims are so badly articulated it is unclear what claims are being made, where specific claims are clearly made the response must clearly deal with the issues raised in the ET1 otherwise there will be a risk that the entire claim could be lost as a result.
In August it was held by the ET that the Financial Conduct Authority (FCA) had discriminated against an employee because of his disability.
In the case of Cunningham v FCA, the Claimant (a solicitor) developed chronic kidney disease and upper arm difficulties, both of which constituted a disability. Reasonable adjustments to working hours were made to allow the Claimant to return to work in December 2016. The Claimant also requested that he no longer worked on a particularly important case (known as case G) to make his workload more manageable and less pressured whilst health investigations continued. This request was not facilitated by the FCA. The Claimant was ambitious and applied (but failed to achieve) a promotion that involved running case G. Although he did not achieve the promotion, he remained involved with the case and was required to write a report on the case for the board.
The report was criticised by his line manager and was raised as an issue in his appraisal in which he was given a rating of one (requiring improvement). This did not take into account the impact of his disability nor the fact that the Claimant had asked to be removed from case G because of his ill health. It was held that this was discrimination on the grounds of disability.
This case serves as a reminder for employers that reasonable adjustments should be considered in respect of any aspect of the work environment, including excessive pressure on an individual, and may require consideration of the reallocation of workload accordingly. If specific work is considered a fundamental element of a role this should be made clear to those concerned and a record made of this fact to provide a degree of protection should the decision be analysed in the future by a tribunal.
As those who have been involved with ET claims will be aware, ACAS provides a free compulsory conciliation service to the parties.
Engaging constructively with this process can reap rewards for employers, particularly when facing spurious unfounded claims as conciliators will often provide the Claimant with an objectively honest view of their case. Often this process assists to resolve matters as reflected in the annual report for 2018, with over 51% of claims being settled and nearly 18% withdrawn.
The appetite overall for early conciliation has increased by more than 20% on last year with 133,000 cases prior to claims being lodged, with only a quarter of these cases subsequently being lodged.