Call us on:  0808 172 93 22 | Offices: London - Northampton

NEWS

Christmas for Employees – Naughty or Nice?

Xmas for Employees

Employment law dos and don’ts at Christmas-time for parties and presents.

Yes it’s that time of the year again: hyperactive children, unsuitable presents and parties where guests outstay their welcome.  And that’s just the staff!  In fact the Christmas spirit (and I’m not referring to the alcoholic one) can be found in the workplace and with some careful planning it can be a “nice” time of the year.  It is however useful to remember the employment law implications of festive activities.  With this in mind, we have set out below some of the dos and don’ts at Christmas-time in terms of employment law.

PARTIES

When parties are going with alcohol flowing, the risk of injury to employees both physically and mentally increases.  Below are some pointers to help mitigate these risks so that everyone enjoys this time of the year.

BEFORE/DURING THE EVENT

DO   DO NOT  
Consider sending a memo/email to employees about standards of conduct required at office functions and the disciplinary sanctions which could result from breaches of these standards. Encourage drunkenness, drugs or violence at the party.  A free bar for the whole evening may encourage heavy drinking.
Ensure that all employees are invited to an office party, even if they are off sick or some form of family friendly leave. Deliberately leave out any employee from participating in festive events.
Ensure the company’s policy on harassment is up to date and remind employees of its existence well in advance.  Guidance may be needed on appropriate “secret santa” gifts (for example, nothing lewd which could be perceived as offensive!). Hold the party at a venue which would not be suitable for some employees to attend due to, for example, disability or religious reasons.
   
Ensure that the venue for the party is accessible by disabled employees. Assume that everyone will eat the same food or refuse to accommodate dietary requests.
Ask employees about dietary requirements  – employees who have certain religious beliefs may be vegetarian or unable to eat beef or pork for example. Leave junior employees to organise a large office party without guidance as to the necessary health and safety requirements.
Ensure there are sufficient security measures in place at the venue. Assume that all partners will be of the opposite sex.
If partners are invited to the party, ensure that the invitation is to any partners, heterosexual or homosexual. Discuss career potential or remuneration with employees at a social event – these conversations can be taken out of context and are open to misinterpretation.
Warn managers not to discuss career potential or remuneration with subordinates at the party – words of encouragement and good intentions can end up being misinterpreted.
AFTER THE EVENT 
Consider warning staff that unauthorised absence the day after the party may result in disciplinary action. Use lateness/absence the day after the party as an excuse to instigate disciplinary proceedings against a particular employee, when other employees have been allowed to get away with similar lateness/absence.
Consider how employees will get home from the venue.  Consider booking taxis or sending out train times. Allow employees to drive home after over-indulging.
Follow up any grievances or complaints raised following a party. Ignore complaints or grievances, particularly in relation to sexual harassment.
Investigate any incident as soon and as fully as possible.  If any serious incidents occur (for example violence or sexual harassment), invoke the disciplinary procedure. Encourage gossip after the office Christmas party.
Try to stamp out any gossip after a social event.  It could for example be interpreted as harassment.  

 

PRESENTS

And here are a couple of notes on present giving:

DO DO NOT
Include all employees if you are intending to give gifts. Discriminate against any individual employees when giving gifts.  For example by giving alcohol to an employee whose religious beliefs require abstinence.
Check the examples given by HMRC of “trivial” gifts which may be given to employees without a tax charge.  For example, a turkey, a bottle of wine, chocolates…  

 

Contact Details

For more details about Christmas parties or company policies please contact:

fgmedia@fgsolicitors.co.uk

This update is for general guidance only and does not constitute definitive advice. 

What we do

At FG Solicitors we generally partner with employers to manage the employment relationship. As a result of years of experience we have developed a unique insight into all the component parts of the employer/employee relationship.
The current climate, however, appears to be one of uncertainty, with regular reports of well-known high street names and brands downsizing significantly or ceasing to trade. This has led to an erosion of confidence generally within the business community.
For some employers, this means a realignment/restructure/reorganisation of the workforce in line with revised corporate objectives.
For others, downsizing is a corporate necessity.
In these situations, where FGS is not acting for the employer, we have the expertise to provide a support service to represent employees on a collective and individual basis in a structured way, which gives the following benefits to the employer:
– We can minimise the disruption to the daily operations of the business and the employees by attending on site and liaising face to face with the potentially affected employees or their elected representatives.
– This is a time and cost effective solution as it can dispense with the need for employees to take time off to seek advice and sign documents
– We can reduce cost by forward planning and liaising with the company’s legal advisers;
– Advise employees collectively on any settlement agreements thereby saving the employer costs at a time when preserving cash is critical
– There will be consistency and certainty of approach as we will be involved from the inception of the process and will be the focal point for employees or their representatives.
– The company will be offering a choice to the employees with FGS giving independent advice to them and this will help to underline the company’s commitment to its pastoral care obligation in the most challenging of circumstances for the employer and the employees.

Harassment or encouragement?

Jack Khurana – Senior Associate Solicitor at FG Solicitors

Hardly a day goes by without another high profile scandal with unsavoury allegations of sexual discrimination or harassment.

Not even our esteemed Prime Minister can escape the scandal of the alleged “under the table thigh squeeze”.
There have been many cases of alleged sexual misconduct and harassment in the workplace so it’s a brave Employment Tribunal that flies in the face of the current climate and concludes that sexual harassment has not been proven.

This was so in the recently reported case of Raj –v- Capita BS. Raj was employed as a Customer Service agent, whose employment was terminated during the probationary period. Raj complained of sexual harassment against Ward, the line manager, who had on several occasions, in an open plan office, stood behind and massaged Raj’s shoulders, neck and back.

Raj argued, in accordance with the wording of the relevant legislation, that this was unwanted conduct either of a sexual nature or related to Raj’s sex within s.26 of the Equality Act 2010.
Having heard the evidence the Employment Tribunal rejected the claim for sexual harassment and found that although Raj had proven physical contact – massages lasting for two or three minutes, long enough to make Raj feel uncomfortable, and that this had the effect of creating an intimidating, hostile, degrading humiliating or offensive environment. However, the Tribunal concluded that the unwanted massage was not conduct of a sexual nature.
Rather, the Tribunal concluded, the reason for the massages was misguided encouragement. Contextually, this was a manager standing over a sitting team member. The area of contact, the Tribunal concluded, was with a gender neutral part of the body, albeit in plain sight of other employees in the open plan office. Yes the actions were unwise and uncomfortable, but not sexual harassment.

On appeal, the Employment Appeal Tribunal upheld the decision on the basis that the Tribunal was entitled to find that while the conduct was unwanted, it wasn’t sexual in nature or related to Raj’s gender.
Arguably, when a man stands behind a woman and massages her back, neck and shoulders in the privacy of their own home, with consent, that is acceptable.

Equally, it’s been argued that, in the workplace, when the woman does not invite such attention, it’s clearly harassment to massage her shoulders, neck and massage.

It may be natural to assume that Raj is female and Ward is male. But that assumption would be wrong in this case. Here the attention and massages were uninvited by Mr Raj – he didn’t ask his female team leader Ms Ward to massage his back neck and shoulders, but when she did, the Tribunal concluded on the facts and evidence before it, that she was encouraging him to improve his performance.

Commentators speculate that had the gender roles been reversed, would Mr Raj’s actions in “encouraging” Ms Ward with unwanted massages on her neck back and shoulders have been construed as of a sexual nature or related to Ms Ward’s sex?

Employers should always bear in mind that all cases and decisions are fact specific. We at FG Solicitors are experts in all areas of Employment Law and HR and we can guide your business through the minefield of discrimination laws and ensure that you are properly protected against claims like this one. Feel free to call us on 0808 172 9322 for a no obligation discussion.

Are you getting the most out of your HR and employment documents?

A strong HR function needs to be supported by legally compliant and clearly written employment documentation.

Improve productivity

A failure to regularly take stock and ensure that these documents are fit for purpose can undermine the strategic aims of your HR team and managers. Out of date documentation will impact on operational efficiency, limit managers’ ability to manage and increase the likelihood of legal claims and financial penalties.

Minimise risk

Disputes can be minimised if up-to-date contracts, policies and procedures are in place and are effectively communicated to the workforce. Employers who want more certainty should ensure their risk management programme includes an annual audit of employment practices and documentation.

The annual audit

A successful audit will identify whether the documents comply with current legislation and reflect current working practices.

Common problems

FG Solicitors’ specialist independent audit continues to highlight the following problem areas which are often overlooked: 

  • Legislative changes have not been addressed

Developments in legislation and regulatory requirements can bring about additional obligations which need to be managed:

  • Even now employment documents do not reflect current rights and obligations under the revised data protection laws (and GDPR). Employees who manage data need to know what is required of them to minimise the risk of a data breach or in the event there is a breach, they need to know what to do. The maximum penalty for a breach is the higher of 20 million Euros (or equivalent in sterling) or 4% of the total annual worldwide turnover.
  • Modern slavery and human trafficking legislation is also often overlooked. Many organisation will not be required to publish the mandatory modern slavery and human trafficking statement, as the £36m turnover threshold is not triggered. It is however essential that steps are taken to tackle slavery and human trafficking within any business and in its supply chain. Many customers now only want to do business with suppliers who can demonstrate that they are safeguarding against modern slavery. Given the broader commercial considerations, a good starting point is a policy in an employee handbook supported by a statement demonstrating the measures that have been taken.
  • Managers are still unsure about family friendly rights. In the absence of clear policy guidance mistakes are frequently made in relation to dependent care leave rights and flexible working applications. The highly publicised and  complex shared parental leave regime, which gives employees who are parents a new, more flexible way to take leave in the first year after the birth or the adoption placement of a child are often overlooked in employee handbooks. A misunderstanding about rights and obligations can lead to costly disputes.
  • Poorly drafted post-termination restrictions

It is only when a valuable client is lost, an entire team follows their former manager or confidential information is misappropriated, that an employer reaches for the employment contract in search of much needed protection. The discovery is usually that there is little or inadequate protection for the business. An investment in carefully drafted post-termination restrictions and confidentiality provisions that are likely to withstand judicial scrutiny are a powerful weapon when the business is under attack from an ex-employee’s competitive activities.   Clauses that deal with garden leave, payments in lieu, the use of social media and intellectual property are also an effective means of protecting the business and should be incorporated in the employment contract.

  • A lack of contractual flexibility

A common mistake it to make the employee handbook contractual so that it forms part of the employees’ terms and conditions. This is not a wise decision as there will be a legal obligation to follow rules and procedures, which may not always be convenient. It may also be difficult to make changes in response to business change without employee consultation.

While employee engagement about changes to contractual terms is always preferable due to the legal risks associated with varying contracts unilaterally, an express provision setting out the circumstances where changes may be made will always put the business ahead.

A lack of flexibility in the documentation can make it harder to respond to unexpected events or specific HR and employment issues. 

Employers who want to be confident that they are complying with their legal obligations should ensure that their employment documentation is both legally compliant and business relevant. 

If you want to know more about our HR and employment law document audit and have more certainty when managing  your business, please contact a member of the team at FG solicitors by sending an email to info@fgsolicitors.co.uk or by calling 01604 871143.

Supreme Court’s historical decision is a reminder to employers to review employee post-termination restrictions!

A landmark case

For the first time in 100 years the Supreme Court has scrutinised an employee non-competition clause. The focus in the case of Egon Zehnder v Tillman was on how the clause had been drafted and whether it was unreasonable.

What was under the spotlight?

Ms Tillman a long standing member of staff in the recruitment business of Egon Zehnder decided to leave and join a competitor. The employment contract contained a relatively standard post-termination restriction preventing Ms Tillman from working for a competitor for a period of six months. More specifically, she agreed not to “directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company…

Key considerations for the Supreme Court

The central issue was whether the non-competition clause was unenforceable; Ms Tillman argued that “interested in” prevented her from holding even a minor shareholding in a competitor, which would be an unreasonable restraint.

All post-termination restrictions are treated as void on public policy grounds. An employer must therefore ensure that a covenant goes no further than is reasonably necessary to protect its legitimate business interests; these interests are commonly confidential information and trade secrets, client/customer relationships and the workforce.

There are specific elements of a covenant that will be scrutinised when there is a dispute over the reasonableness of the restriction. Common elements being the duration or geographical scope of the provision. One other key factor often relied upon is whether any words which render the covenant unreasonable can be severed from the restriction to render the rest of the covenant enforceable.   

As the lower courts could not agree on whether the clause in Ms Tillman’s contract was reasonable, the Supreme Court was required to intervene and decide whether the words “interested in” rendered the clause completely unenforceable or alternatively, by severing the offending words left Egon Zehnder with the protection of the remainder of the clause.

The decision

The Supreme Court considered the clause and concluded that the inclusion of the words “interested in” rendered the clause unenforceable as an unreasonable restraint. It confirmed however that by removing the offending words, Egon Zehnder was left with an enforceable non-competition clause.

The clarity from the Supreme Court should give employers more confidence when it comes to enforcing employee post-termination restrictive covenants. In the future, the courts will be prepared to cut out offending parts of a clause so that what remains becomes reasonable and enforceable.

Warning

Employers should not see this case as a green light to introduce wider and more restrictive clauses in the hope that if there is a dispute, the courts will apply a similar approach to the one adopted in this case. 

The courts will never excuse poor drafting and will not re-write a clause; severance will only be used if the remaining parts of a clause make sense without adjustment to the overall effect of the restriction. Given this, severance should only be relied upon as a last resort, as it may not provide an absolute solution to restricting the competitive activities of an ex-employee. 

The priority for employers

Employers should make properly drafted post-termination restrictions a priority and avoid a one-size fits all approach. To provide greater protection, regular reviews throughout the employment relationship are also important to identify if new restrictions need to be introduced in response to business change and job promotions.

If you want to protect against post-termination competitive activities, please contact a member of the team at FG solicitors by sending an email to info@fgsolicitors.co.uk or by calling 01604 871143.

Call us on:  0808 172 93 22

NEWS

Christmas for Employees – Naughty or Nice?

Xmas for Employees

Employment law dos and don’ts at Christmas-time for parties and presents.

Yes it’s that time of the year again: hyperactive children, unsuitable presents and parties where guests outstay their welcome.  And that’s just the staff!  In fact the Christmas spirit (and I’m not referring to the alcoholic one) can be found in the workplace and with some careful planning it can be a “nice” time of the year.  It is however useful to remember the employment law implications of festive activities.  With this in mind, we have set out below some of the dos and don’ts at Christmas-time in terms of employment law.

PARTIES

When parties are going with alcohol flowing, the risk of injury to employees both physically and mentally increases.  Below are some pointers to help mitigate these risks so that everyone enjoys this time of the year.

BEFORE/DURING THE EVENT

DO   DO NOT  
Consider sending a memo/email to employees about standards of conduct required at office functions and the disciplinary sanctions which could result from breaches of these standards. Encourage drunkenness, drugs or violence at the party.  A free bar for the whole evening may encourage heavy drinking.
Ensure that all employees are invited to an office party, even if they are off sick or some form of family friendly leave. Deliberately leave out any employee from participating in festive events.
Ensure the company’s policy on harassment is up to date and remind employees of its existence well in advance.  Guidance may be needed on appropriate “secret santa” gifts (for example, nothing lewd which could be perceived as offensive!). Hold the party at a venue which would not be suitable for some employees to attend due to, for example, disability or religious reasons.
   
Ensure that the venue for the party is accessible by disabled employees. Assume that everyone will eat the same food or refuse to accommodate dietary requests.
Ask employees about dietary requirements  – employees who have certain religious beliefs may be vegetarian or unable to eat beef or pork for example. Leave junior employees to organise a large office party without guidance as to the necessary health and safety requirements.
Ensure there are sufficient security measures in place at the venue. Assume that all partners will be of the opposite sex.
If partners are invited to the party, ensure that the invitation is to any partners, heterosexual or homosexual. Discuss career potential or remuneration with employees at a social event – these conversations can be taken out of context and are open to misinterpretation.
Warn managers not to discuss career potential or remuneration with subordinates at the party – words of encouragement and good intentions can end up being misinterpreted.
AFTER THE EVENT 
Consider warning staff that unauthorised absence the day after the party may result in disciplinary action. Use lateness/absence the day after the party as an excuse to instigate disciplinary proceedings against a particular employee, when other employees have been allowed to get away with similar lateness/absence.
Consider how employees will get home from the venue.  Consider booking taxis or sending out train times. Allow employees to drive home after over-indulging.
Follow up any grievances or complaints raised following a party. Ignore complaints or grievances, particularly in relation to sexual harassment.
Investigate any incident as soon and as fully as possible.  If any serious incidents occur (for example violence or sexual harassment), invoke the disciplinary procedure. Encourage gossip after the office Christmas party.
Try to stamp out any gossip after a social event.  It could for example be interpreted as harassment.  

 

PRESENTS

And here are a couple of notes on present giving:

DO DO NOT
Include all employees if you are intending to give gifts. Discriminate against any individual employees when giving gifts.  For example by giving alcohol to an employee whose religious beliefs require abstinence.
Check the examples given by HMRC of “trivial” gifts which may be given to employees without a tax charge.  For example, a turkey, a bottle of wine, chocolates…  

 

Contact Details

For more details about Christmas parties or company policies please contact:

fgmedia@fgsolicitors.co.uk

This update is for general guidance only and does not constitute definitive advice. 

What we do

At FG Solicitors we generally partner with employers to manage the employment relationship. As a result of years of experience we have developed a unique insight into all the component parts of the employer/employee relationship.
The current climate, however, appears to be one of uncertainty, with regular reports of well-known high street names and brands downsizing significantly or ceasing to trade. This has led to an erosion of confidence generally within the business community.
For some employers, this means a realignment/restructure/reorganisation of the workforce in line with revised corporate objectives.
For others, downsizing is a corporate necessity.
In these situations, where FGS is not acting for the employer, we have the expertise to provide a support service to represent employees on a collective and individual basis in a structured way, which gives the following benefits to the employer:
– We can minimise the disruption to the daily operations of the business and the employees by attending on site and liaising face to face with the potentially affected employees or their elected representatives.
– This is a time and cost effective solution as it can dispense with the need for employees to take time off to seek advice and sign documents
– We can reduce cost by forward planning and liaising with the company’s legal advisers;
– Advise employees collectively on any settlement agreements thereby saving the employer costs at a time when preserving cash is critical
– There will be consistency and certainty of approach as we will be involved from the inception of the process and will be the focal point for employees or their representatives.
– The company will be offering a choice to the employees with FGS giving independent advice to them and this will help to underline the company’s commitment to its pastoral care obligation in the most challenging of circumstances for the employer and the employees.

Harassment or encouragement?

Jack Khurana – Senior Associate Solicitor at FG Solicitors

Hardly a day goes by without another high profile scandal with unsavoury allegations of sexual discrimination or harassment.

Not even our esteemed Prime Minister can escape the scandal of the alleged “under the table thigh squeeze”.
There have been many cases of alleged sexual misconduct and harassment in the workplace so it’s a brave Employment Tribunal that flies in the face of the current climate and concludes that sexual harassment has not been proven.

This was so in the recently reported case of Raj –v- Capita BS. Raj was employed as a Customer Service agent, whose employment was terminated during the probationary period. Raj complained of sexual harassment against Ward, the line manager, who had on several occasions, in an open plan office, stood behind and massaged Raj’s shoulders, neck and back.

Raj argued, in accordance with the wording of the relevant legislation, that this was unwanted conduct either of a sexual nature or related to Raj’s sex within s.26 of the Equality Act 2010.
Having heard the evidence the Employment Tribunal rejected the claim for sexual harassment and found that although Raj had proven physical contact – massages lasting for two or three minutes, long enough to make Raj feel uncomfortable, and that this had the effect of creating an intimidating, hostile, degrading humiliating or offensive environment. However, the Tribunal concluded that the unwanted massage was not conduct of a sexual nature.
Rather, the Tribunal concluded, the reason for the massages was misguided encouragement. Contextually, this was a manager standing over a sitting team member. The area of contact, the Tribunal concluded, was with a gender neutral part of the body, albeit in plain sight of other employees in the open plan office. Yes the actions were unwise and uncomfortable, but not sexual harassment.

On appeal, the Employment Appeal Tribunal upheld the decision on the basis that the Tribunal was entitled to find that while the conduct was unwanted, it wasn’t sexual in nature or related to Raj’s gender.
Arguably, when a man stands behind a woman and massages her back, neck and shoulders in the privacy of their own home, with consent, that is acceptable.

Equally, it’s been argued that, in the workplace, when the woman does not invite such attention, it’s clearly harassment to massage her shoulders, neck and massage.

It may be natural to assume that Raj is female and Ward is male. But that assumption would be wrong in this case. Here the attention and massages were uninvited by Mr Raj – he didn’t ask his female team leader Ms Ward to massage his back neck and shoulders, but when she did, the Tribunal concluded on the facts and evidence before it, that she was encouraging him to improve his performance.

Commentators speculate that had the gender roles been reversed, would Mr Raj’s actions in “encouraging” Ms Ward with unwanted massages on her neck back and shoulders have been construed as of a sexual nature or related to Ms Ward’s sex?

Employers should always bear in mind that all cases and decisions are fact specific. We at FG Solicitors are experts in all areas of Employment Law and HR and we can guide your business through the minefield of discrimination laws and ensure that you are properly protected against claims like this one. Feel free to call us on 0808 172 9322 for a no obligation discussion.

Are you getting the most out of your HR and employment documents?

A strong HR function needs to be supported by legally compliant and clearly written employment documentation.

Improve productivity

A failure to regularly take stock and ensure that these documents are fit for purpose can undermine the strategic aims of your HR team and managers. Out of date documentation will impact on operational efficiency, limit managers’ ability to manage and increase the likelihood of legal claims and financial penalties.

Minimise risk

Disputes can be minimised if up-to-date contracts, policies and procedures are in place and are effectively communicated to the workforce. Employers who want more certainty should ensure their risk management programme includes an annual audit of employment practices and documentation.

The annual audit

A successful audit will identify whether the documents comply with current legislation and reflect current working practices.

Common problems

FG Solicitors’ specialist independent audit continues to highlight the following problem areas which are often overlooked: 

  • Legislative changes have not been addressed

Developments in legislation and regulatory requirements can bring about additional obligations which need to be managed:

  • Even now employment documents do not reflect current rights and obligations under the revised data protection laws (and GDPR). Employees who manage data need to know what is required of them to minimise the risk of a data breach or in the event there is a breach, they need to know what to do. The maximum penalty for a breach is the higher of 20 million Euros (or equivalent in sterling) or 4% of the total annual worldwide turnover.
  • Modern slavery and human trafficking legislation is also often overlooked. Many organisation will not be required to publish the mandatory modern slavery and human trafficking statement, as the £36m turnover threshold is not triggered. It is however essential that steps are taken to tackle slavery and human trafficking within any business and in its supply chain. Many customers now only want to do business with suppliers who can demonstrate that they are safeguarding against modern slavery. Given the broader commercial considerations, a good starting point is a policy in an employee handbook supported by a statement demonstrating the measures that have been taken.
  • Managers are still unsure about family friendly rights. In the absence of clear policy guidance mistakes are frequently made in relation to dependent care leave rights and flexible working applications. The highly publicised and  complex shared parental leave regime, which gives employees who are parents a new, more flexible way to take leave in the first year after the birth or the adoption placement of a child are often overlooked in employee handbooks. A misunderstanding about rights and obligations can lead to costly disputes.
  • Poorly drafted post-termination restrictions

It is only when a valuable client is lost, an entire team follows their former manager or confidential information is misappropriated, that an employer reaches for the employment contract in search of much needed protection. The discovery is usually that there is little or inadequate protection for the business. An investment in carefully drafted post-termination restrictions and confidentiality provisions that are likely to withstand judicial scrutiny are a powerful weapon when the business is under attack from an ex-employee’s competitive activities.   Clauses that deal with garden leave, payments in lieu, the use of social media and intellectual property are also an effective means of protecting the business and should be incorporated in the employment contract.

  • A lack of contractual flexibility

A common mistake it to make the employee handbook contractual so that it forms part of the employees’ terms and conditions. This is not a wise decision as there will be a legal obligation to follow rules and procedures, which may not always be convenient. It may also be difficult to make changes in response to business change without employee consultation.

While employee engagement about changes to contractual terms is always preferable due to the legal risks associated with varying contracts unilaterally, an express provision setting out the circumstances where changes may be made will always put the business ahead.

A lack of flexibility in the documentation can make it harder to respond to unexpected events or specific HR and employment issues. 

Employers who want to be confident that they are complying with their legal obligations should ensure that their employment documentation is both legally compliant and business relevant. 

If you want to know more about our HR and employment law document audit and have more certainty when managing  your business, please contact a member of the team at FG solicitors by sending an email to info@fgsolicitors.co.uk or by calling 01604 871143.

Supreme Court’s historical decision is a reminder to employers to review employee post-termination restrictions!

A landmark case

For the first time in 100 years the Supreme Court has scrutinised an employee non-competition clause. The focus in the case of Egon Zehnder v Tillman was on how the clause had been drafted and whether it was unreasonable.

What was under the spotlight?

Ms Tillman a long standing member of staff in the recruitment business of Egon Zehnder decided to leave and join a competitor. The employment contract contained a relatively standard post-termination restriction preventing Ms Tillman from working for a competitor for a period of six months. More specifically, she agreed not to “directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company…

Key considerations for the Supreme Court

The central issue was whether the non-competition clause was unenforceable; Ms Tillman argued that “interested in” prevented her from holding even a minor shareholding in a competitor, which would be an unreasonable restraint.

All post-termination restrictions are treated as void on public policy grounds. An employer must therefore ensure that a covenant goes no further than is reasonably necessary to protect its legitimate business interests; these interests are commonly confidential information and trade secrets, client/customer relationships and the workforce.

There are specific elements of a covenant that will be scrutinised when there is a dispute over the reasonableness of the restriction. Common elements being the duration or geographical scope of the provision. One other key factor often relied upon is whether any words which render the covenant unreasonable can be severed from the restriction to render the rest of the covenant enforceable.   

As the lower courts could not agree on whether the clause in Ms Tillman’s contract was reasonable, the Supreme Court was required to intervene and decide whether the words “interested in” rendered the clause completely unenforceable or alternatively, by severing the offending words left Egon Zehnder with the protection of the remainder of the clause.

The decision

The Supreme Court considered the clause and concluded that the inclusion of the words “interested in” rendered the clause unenforceable as an unreasonable restraint. It confirmed however that by removing the offending words, Egon Zehnder was left with an enforceable non-competition clause.

The clarity from the Supreme Court should give employers more confidence when it comes to enforcing employee post-termination restrictive covenants. In the future, the courts will be prepared to cut out offending parts of a clause so that what remains becomes reasonable and enforceable.

Warning

Employers should not see this case as a green light to introduce wider and more restrictive clauses in the hope that if there is a dispute, the courts will apply a similar approach to the one adopted in this case. 

The courts will never excuse poor drafting and will not re-write a clause; severance will only be used if the remaining parts of a clause make sense without adjustment to the overall effect of the restriction. Given this, severance should only be relied upon as a last resort, as it may not provide an absolute solution to restricting the competitive activities of an ex-employee. 

The priority for employers

Employers should make properly drafted post-termination restrictions a priority and avoid a one-size fits all approach. To provide greater protection, regular reviews throughout the employment relationship are also important to identify if new restrictions need to be introduced in response to business change and job promotions.

If you want to protect against post-termination competitive activities, please contact a member of the team at FG solicitors by sending an email to info@fgsolicitors.co.uk or by calling 01604 871143.