employment lawrestrictive covenantssettlement agreements

Lots of employers think that just getting someone to sign a settlement agreement solves a problem. Well, that’s a risky approach and, for the second time this month, has been demonstrated to be not necessarily the best idea.

An area of employment that can be “problematic” is the financial services sector. This was well demonstrated in the case of Ward v Fiducia Comprehensive Financial Planning Limited.

Mr Ward started employment with Fiducia as a senior financial adviser in January 2009. In May 2018 he gave three months’ notice to terminate his employment. The effective date of termination, for contract reasons, was 7 June 2018.

All seemed fine on that basis but he claimed that, following the giving of notice, he was subjected to “bullying and intimidating conduct” by one of the directors, Marcus Grimshaw, at a meeting on 25 May 2018. He alleged that he was subjected to false and spurious allegations. He also said that he was blackmailed, or threatened with blackmail, unless he agreed with lengthening his post-termination covenants. He said that, if he failed to do so, he would be subject to allegations of gross misconduct (without foundation) in order to “tarnish his professional reputation”.

Mr Ward said that the employer applied excessive pressure on him to sign the restrictive covenant and discouraged him from obtaining legal advice.

At a meeting Mr Grimshaw said that he wanted to know where Mr Ward was going to be working in future. Mr Ward said that he was going to work with Ms Catlin, a former colleague. Mr Grimshaw became hostile and said that, if he did, he would treat Mr Ward in the same way that he had Ms Catlin (which was known to be hostile). That meant that, with background evidence, he had reason to feel that he was intimidated and harassed.

Having wrongly implied that Mr Ward was involved in a compliance breach a director, Mr Scott, who had previously reduced him to tears, was aggressive towards Mr Ward and alleged that he had wrongly represented that he was a solicitor and had, on that basis, received a significant payment. A few days later, Mr Ward was sent an agreement which would have increased his restrictive covenants from 12 to 24 months. He was told that if he didn’t sign, clawbacks would apply. He refused and went to his GP and was signed off as unfit to work. On 7 June he resigned, again, and left his employment.

The tribunal concluded that the employer made false and spurious allegations against Mr Ward “in an effort to pressurise him into either accepting the terms of the extended restrictive covenant agreement or to deter him from joining a potential competitor. I am satisfied that the allegations of misconduct were wholly disingenuous”.

Employment Judge Ahmed continued:

The Respondent was fully aware of the fact that the Claimant was a beneficiary under the Will of a client. This had been discussed with the Respondent. There were internal emails passing between Mr Grimshaw and Mr Scott concerning the Trust created by the Testator that the Respondent’s business would manage. The relevant Will was on the Respondent’s database. It is clear from the terms of Will that the Claimant was a beneficiary. It is inconceivable that the Respondent would have placed the Will on their database without reading it. It is also inconceivable that the Respondent would have acted or intended to act as managers of the Trust without knowing the terms of the Will. I do not therefore accept the Respondent’s evidence that they were wholly ignorant of the Claimant’s beneficial interest in the estate. The Claimant may have been unwise in not informing Openwork or confirming that in writing to his employer but that does not necessarily detract from the fact that the Respondent was aware of the position.

I am satisfied that the Respondent applied inappropriate and excessive pressure on the Claimant to execute the extended restrictive covenant agreement. Whilst the term ‘blackmail’ may be somewhat emotive, there is no doubt that the Respondent made it clear to the Claimant that if he refused to sign the new draft agreement they would pursue allegations of gross misconduct against him which would undoubtedly tarnish his professional reputation. In doing so, it is regrettable that Openwork became a party to these unfounded allegations. Openwork’s “investigation” was not undertaken fairly or with any real input from the Claimant. It is also regrettable that despite saying that they did not wish to involve itself in a contractual dispute that is precisely what Openwork did. The Respondent who has been legally represented has not sought to call any evidence from Openwork to establish the truth of the allegations.

I am satisfied that the allegation that the Claimant held himself out as a solicitor is without substance.

There has been no expert evidence provided by the Respondent as to what emails, if any, were deleted or amounted to an improper use.

I am therefore satisfied that the Claimant resigned on the second occasion in response to a breach of the implied term of trust and confidence. Such conduct clearly meets the Malik test.

I am satisfied the Claimant resigned in response to the breach. There was no reason for him to cut short his notice period otherwise. He did not delay in doing so nor did he affirm the breach.

Although the Respondent argues in the alternative that the dismissal, even if constructive, was nevertheless fair, the Respondent has failed to establish facts from which a potentially fair reason may be found. The constructive dismissal was therefore unfair.

paragraphs 20 to 26 of the judgment

Following the announcement of the decision on liability the issue of remedy was agreed.

The message is that, although I’m sure that none of our clients would behave this way, regardless of contractual entitlements, there is an obligation to behave reasonably, failing which you should not expect to be treated favourably in any resulting court proceedings