Employment E-Missive No.10
-------------------------
by Charles Price, LLB.(hons) LLM, barrister
Pendragon Chambers,
Swansea
SA1 5RG
Tel: (01792) 411188
Fax: (01792 411189
DX 39572, Swansea
----------------------------------------------------------------------------
----------
Charles Price practices in Respondent and Applicant work in Bristol and
Cardiff. This e-mail is for academic purposes only.
----------------------------------------------------------------------------
----------
1) Protecting Employers Interests - Restrictive Covenants
2) New Code of Practice on Disciplinary and Grievance Procedures
3) Right Not to be Unfairly Dismissed Applies Only to 'Employment in Great
Britain'
Protecting Employers Interests - Restrictive Covenants
------------------------------------------------------
Generally, express contractual agreements designed to exert control over the
activities of past employees are upheld only if they are reasonably required
for the protection of the employer's legitimate interests.
It is implied that neither past nor present employees may misuse
confidential information belonging to their employers whether this is
expressly formed in an employment contract or not. The scope however, of
what is considered confidential diminishes considerably at the end of
employment
The absence of a 'gardening leave' clause in the a case weakens the hand of
the ex-employer. Such a clause can prevent the employee working during their
notice period. A simple covenant in the contract restricting the employee's
activities, especially after the employment has ended is considered to be
prima facie unenforceable as being contrary to public policy. In order for
the restraint to be held valid it must first, be reasonable in the interests
of the contracting parties and second, be reasonable in the interests of the
public Nordenfelt v Maxim Nordenfelt Co [1984] AC 535.
In assessing reasonableness the court will firstly decide what the covenant
means, when properly constructed and second the court will decide whether
the employer has shown a legitimate interest to protect, in relation to that
employee's employment. This can be: customer connection or trade secrets and
other confidential information. In the past restrictive covenants
restricting the movements of ex-employees of solicitors firms have been
upheld and therefore it is the terms that become important in determining
whether such a covenant is enforceable Hollis & Co v Stocks 2000 IRLR
712,CA.
In assessing reasonableness, the court will firstly decide what the covenant
means, when properly constructed and second the court will decide whether
the employer has shown a legitimate interest to protect, in relation to that
employee's employment. This can be: customer connection or trade secrets and
other confidential information. In the past restrictive covenants
restricting the movements of ex-employees of solicitors firms have been
upheld and therefore it is the terms that become important in determining
whether such a covenant is enforceable Hollis & Co v Stocks 2000 IRLR
712,CA.
Enforceability of Term Restricting The Canvassing, Soliciting, Approaching
Clients of
----------------------------------------------------------------------------
---------
the Ex-employer.
----------------
A 'non-solicitation' covenant in an employment contact is most likely to be
upheld if the pool of prohibited clients is limited to those with whom the
former employee dealt personally, within a defined and reasonable period,
immediately preceding the termination of her employment. However in
Dentmaster (UK) Ltd v Kent [1997] IRLR 636 the court allowed the covenant to
restrict solicitation of the employer's whole client base.
It is not only the range of the client base, which can render a covenant
unenforceable but the inclusion of unreasonable time limits. Covenants have
more chance of being deemed enforceable by a court the shorter they are. One
year, for example rather than two years non-solicitation. A danger exists in
being too ambitious as covenants will not be rewritten by the court so as to
render them enforceable Davies v Davies (1987) 36 ChD 359. Accordingly if a
restraint lasting two years is deemed unreasonable then no order can be
obtained suggesting one year. In the case of PR Consultants Scotland Ltd. V
Mann 1996 IRLR 188. a covenant restricting an employee seeking employment
with rival businesses for twelve months was upheld but it is highly likely
that two years would be deemed too wide.
Bad draftsmanship is not alone sufficient to render a covenant
unenforceable. The courts may restrict general words and make them more
reasonable by reading in limitations derived from the assumed purpose of the
covenant Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526. Indeed, if
part of a covenant is deemed enforceable it may be 'blue pencilled' or
severed provided that what remains makes independent sense and the sense of
the contract is not changed Sadler v Imperial Life Assurance Co. of Canada
Ltd [1988] IRLR 388.
In conclusion, the enforceability of restrictive covenants depend on the
circumstances of each case and the burden is on the employer to show that
the period of restraint is reasonable Skully UK Ltd v Lee 1998 IRLR 259. If
you are worried about the enforceability of your restrictive covenants or
think that you should have them contact a solicitor or a barrister.
New Code of Practice on Disciplinary and Grievance Procedures
-------------------------------------------------------------
Acas, has produced a draft Code of Practice on disciplinary and grievance
procedures in the workplace. The Code is used by Employment Tribunals in
making their decisions on cases of alleged unfair dismissal.
The new draft Code takes account of the statutory procedures due to come
into effect later this year. Acas has also brought the Code up to date and
claim that they have made it easier to use. The Code is on Acas's website
www.acas.org.uk and available from Acas publications 08702 42 90 90. The
consultation will run until 14 April.
Points of Interest:
-------------------
Written/Verbal Warnings
-----------------------
Explicit reference to the first warning being either written or oral
depending on the nature of the problem has been removed. Acas explain the
reasoning for this: 'We have done this to clear up any confusion about how
warnings should be conveyed to the employee in the first instance and also
to address the potential anomaly in the existing code that whilst an
employee might be given an oral warning, if this is backed up with written
confirmation it effectively becomes a written warning'.
Improvement Plans - Not Warnings!
---------------------------------
ACAS have also made some cosmetic alterations to the warning procedure: 'We
have recognised that in cases of poor performance it may be felt that the
formal action preceding the issuing of a final written warning should not be
described as a "warning", which may be thought inappropriate. Referring
instead to a performance improvement plan, or some similar term, may be
thought more appropriate and we believe that organizations, both large and
small, will find this flexibility helpful. It would of course be necessary
for organizations to make sure that the employee understood that this was a
formal process and that failure to improve could lead to a final written
warning!.
Employers May Move Straight to Final Written Warning
----------------------------------------------------
Thirdly, ACAS have expanded the section in the current Code which describes
the circumstances in which employers may move direct to a final written
warning. The existing reference to 'where the infringement is sufficiently
serious an employer may issue a final written warning' remains. ACAS have in
effect expanded the meaning of the 'sufficiently serious' clause by saying
that 'there may be occasions where the worker's misconduct or poor
performance, or its continuance, is having a serious effect on the
employer's business, and in these circumstances it may be appropriate to
move to a final written warning' But they have reigned in the impact of this
by adding the qualification that the employers must decide how they will
deal with problems at the first formal stage. This new element to final
warning is close to expanding the category of 'gross misconduct' cases and
would certainly bolster the employer's armoury.
Extension to Three Month Time Limit
------------------------------------
A final point is perhaps the most important in that a plethora of cases are
deemed 'out of time' due to the Applicant sleep walking past the limitation
period because they are pursuing an internal grievance. An extension will be
introduced to the 3-month time limit for unfair dismissal claims, where the
employee has reasonable grounds for believing a disciplinary procedure is
still ongoing when the 3-month limit expires.
Right Not to be Unfairly Dismissed Applies Only to 'Employment in Great
Britain'
----------------------------------------------------------------------------
----
Serco Ltd and Stephen Lawson (Citation Number: [2004] EWCA Civ 12)C.APP Case
No: A1/2003/0649/
For those of you with overseas clients a decision today in has overturned a
2001 employment tribunal decision that an employee working anywhere in the
world can claim unfair dismissal against any employer, if that employer has
a place of business in England or Wales, irrespective of the governing laws
or where the employee works.
This case is concerned with the statutory right not to be unfairly
dismissed. Different considerations will apply when contractual claims, for
example for wrongful dismissal, are to be determined.
http://www.bailii.org.uk/ew/cases/EWCA/Civ/2004/12.html
----------------------------------------------------------------------------
-----------
This e-mail is sent to over 300 employment lawyers. Please contact me if
another employment lawyer would like this service or if you have any other
comments! To Unsubscribe please return the e-mail with 'unsubscribe' in the
heading.
----------------------------------------------------------------------------
-----------
---------------------------------------------------------------------
Charlie Price has held the positions of Head of Employment Law at both
Sheffield and Bristol City Councils and practises in employment and personal
injury law across England and Wales.
------------------------------------------------------