Key employment law cases: June 2020

Settlement agreements: High court rules that breach of confidentiality clause did not end the agreement

Duchy Farm Kennels Limited v Graham William Steels – High Court

The High Court has ruled that a confidentiality clause in a COT3 was not a condition of the agreement and that breaching it did not bring an end to the agreement.

Following a dispute brought in the tribunal, a settlement was negotiated and agreed through Acas under a COT3. Under the COT3, Duchy agreed to pay former employee, Mr Steels, the sum of £15,500 in 47 weekly instalments of £330 in full and final settlement of his tribunal claims. It also included a confidentiality clause, requiring Mr Steels not to disclose the fact and terms of the agreement, as well as a warranty that he had not already done so. Some 9 weeks later, after discovering that Mr Steels had disclosed the fact and amount of the settlement payment to a former colleague, Duchy stopped making the payments. Mr Steels issued proceedings in the County Court to recover the unpaid sums.

The County Court ruled that the confidentiality clause was not a condition of the contract, which would give the other party the right to end the contract if breached. Instead, it was an intermediate or innominate term and Duchy remained obliged to make the payments. Duchy appealed.

The High Court agreed that the clause was not a condition because it was a generic clause, included almost “as a matter of course”. The fact it was there did not indicate that confidentiality was of key importance. The Court said that it was possible for a confidentiality clause to amount to a condition, and suggested that it may be helpful to (i) expressly stipulate that the clause is a condition, and (ii) make specific provision in the terms for what should happen in the event of a breach (i.e. repay all or a proportion of the settlement sum). Employers are advised to review template wording.

Parallel proceedings: High court grants retrospective permission to rely on documents disclosed in employment tribunal proceedings

Notting Hill Genesis v Ali - High Court

In this interim injunction application, the High Court granted retrospective permission for an employer (NHG) to rely on documents that its former employee had disclosed in separate employment tribunal proceedings.

NHG was a large housing association, which employed Mr Ali as a Financial Inclusion Officer from April 2018 until he resigned in October 2018. He then brought claims in the employment tribunal for constructive dismissal, discrimination and whistleblowing. It transpired during those proceedings that Mr Ali had retained and disclosed confidential documents in breach of contract, which contained the personal data of residents and potentially in breach of the GDPR. NHG sought an interim injunction to restrain Mr Ali from further disclosure of their confidential documents. To rely on those documents, NHG had to make an application for permission to use them.

The High Court granted their application. The case is interesting because retrospective applications are rarely granted: permission for collateral use is usually sought in advance. However, it will depend on the circumstances, and a balancing act between the individual’s right to privacy and the wider public good. In this case it was important that the court would have granted permission had it been sought in advance. The interim injunction restraining Mr Ali from further disclosing the documents was also granted.

The case also highlights some of the issues which arise when managing separate but related proceedings. We have a dedicated Insights Feature on the issues which arise in parallel proceedings here and a page specifically on managing materials between cases here.

Constructive dismissal: claim can succeed even if last straw in series of acts was innocuous

Williams v Governing body of Alderman – EAT

The EAT has ruled that a constructive dismissal claim can succeed even if the last in a series of acts (the last straw) was innocuous.

In this case, Mr Williams was a primary school teacher with a disability. He resigned after a series of events, including his suspension due to a child protection matter and disciplinary proceedings for alleged breach of the school’s data protection policy. The data protection policy breach related to downloading documents to share with his colleague, Ms Sydenham, the trade union representative. When he resigned, he said that the last straw was learning that Ms Sydenham (his trade union rep) had been instructed not to contact him.

The Tribunal held that the school’s instruction to Ms Sydenham not to contact him, as part of their investigation, was reasonable in the circumstances and innocuous. It followed that this act could not be the last straw entitling him to treat the contract as terminated. However, the EAT disagreed. The employer’s earlier conduct in itself amounted to a fundamental breach of contract and could be relied upon, provided the employee had not affirmed the earlier breach and resigned at least partly in response to that.

Restrictive covenants: absence of garden leave set-off clause not fatal to non-compete

Square Global Limited v Julien Leonard – High Court

Mr Leonard, a former broker at Square, resigned without notice alleging constructive unfair dismissal and that his post-termination restrictions were unenforceable. At that time, he had been in advanced discussions for 7 months with a rival financial services business, Market Securities, about leaving Square to join them instead. Square issued a claim, arguing that Mr Leonard was in breach of various terms of his employment contract, seeking a declaration that he remained employed for his six months’ notice (during which it could invoke a garden leave clause), injunctive relief to enforce his six month non-compete and other PTRs, and damages in lost profits for his refusal to perform duties.

Mr Leonard served a Defence and counterclaimed, alleging that there had been a course of conduct during his employment, consisting of bullying and unfairness (although notably no whistleblowing), which amounted (either individually or cumulatively) to a breach of trust of confidence.

The Court found Mr Leonard’s evidence to be unconvincing and accepted Square’s case, ruling that he was in breach of his notice period and the non-compete clause applied for a further six months. It was satisfied, on the facts, that Square had legitimate protectable interests – for example, Mr Leonard had been able to spend 3% of net production on client entertainment to build relationships, and the value, portability and longevity of confidential information in his specific field (exotic trading). The fact that there was no set-off between any period of garden leave and the non-compete period did not render the restriction unenforceable.

For more key employment law updates from us:

• read our key developments over the last month;
• stay Ahead of the Curve with our summaries covering the key aspects
  of employment law under review by the government;
• scroll through our key dates timeline showing recent and anticipated
  changes to employment law; and
• attend our upcoming events or catch up on training.