It is a central tenet of employment law that contract terms can be both express (i.e. written in to a contract) and implied. Some key duties, such as a duty of faithful service, are implied into all contracts of employment, whether or not a written contact exists. In 1998 the House of Lords, in Malik v BCCI, confirmed the existence of a mutual duty of trust and confidence. Mr Malik and Mr Mahmud both worked for the Bank of Commerce and Credit International which went insolvent in circumstances including allegations of fraud, money laundering and numerous other criminal activities. They could not find alternative employment and sued for damages based on loss of job prospects and reputational damage as a result of their association with BCCI as employees. They contended that there was an implied term in their employment contract that nothing would be done calculated to undermine mutual trust and confidence.
It was held in the House of Lords that such a term existed in all contracts of employment.Lord Steyn called it a “sound development” and continued:
Such implied terms operate as default rules. The parties are free to exclude or modify them. But is common ground that in the present case the particular terms of the contracts of employment of the two applicants could not affect an implied obligation of mutual trust and confidence… It was a change in legal culture which made possible the evolution of the implied term of trust and confidence…
The motives of the employer cannot be determinative, or even relevant, in judging the employees’ claims for damages for breach of the implied obligation. If conduct objectively considered is likely to cause serious damage to the relationship between employer and employee a breach of the implied obligation may arise.
There is also no need for an employee to know of the breach in the course of employment because, if that “were right it would mean that an employer who successfully concealed dishonest and corrupt practices before termination of the relationship cannot in law commit a breach of the implied obligation whereas the dishonest and corrupt employer who is exposed during the relationship can be held liable in damages. That cannot be right.” Claims of this nature have been characterised as for “stigma damages”.
Fast forward to 2011 and there are obvious reasons why recently disclosed events at the News of the World could provide a basis for similar claims. In many cases it would clearly be difficult for evidence to be obtained in order to prove such claims but the strategic decision by News International to bare its soul has apprently eliminated that problem. News International has publicly stated that it “failed to get to the bottom of repeated wrongdoing that occurred without conscience or legitimate purpose” and James Murdoch described the actions taken at the paper as “sullied by behaviour that was wrong”, perhaps even “inhuman”.
Such claims, based on extended loss of earnings, could be very valuable. It has been widely reported that the sacked employees were paid off with the equivalent 90 days’ pay to take into account the Company’s failure to observe the obligatory 90 days consultation period for 100 or more simultaneous redundancies (Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995). Consequently, “stigma claims” could provide much more significant redress.
Another, admittedly rather more tenuous, potential claim may arise under the Transfer of Undertakings Regulations (TUPE). TUPE protection arises when there is a transfer of a stable economic entity which retains its identity following the transfer. There does not need to be a contract for the transfer of the business. Consequently, in one well known European case, when a local Ford dealership closed down and another, ostensibly unrelated, Ford dealership opened in the same town, the contracts of the employees were deemed to be transferred by operation of the Regulations.
There are widespread rumours that News International intends to launch a popular Sunday newspaper following the demise of the News of the World. Two domain names, thesunonsunday.co.uk and sunonsunday.co.uk, were registered a few days before the News of the World closed (the Sunday Sun is an existing and unconnected paper based in North East England). If such a paper (or a similar paper) is launched then, on the face of it, News International employees will be treated as continuing employees of News International with the new paper. It should be noted that it doesn’t matter how long it takes; rather, all that is required is a tangential connection between the two, sufficient to satisfy the economic entity and identity test.