employment matters - clarke willmott llp€¦ · employer in the case of tillman v egon zehnder ltd...
TRANSCRIPT
The Supreme Court decided in favour of the employer in the case of Tillman v Egon Zehnder Ltd which was heard in January 2019. It held that two words could be severed from the covenant restricting Ms Tillman from joining a competitor of Egon Zehnder Ltd (EZL). Without these two words, the restrictive covenant was enforceable against her.
Background
Ms Tillman was employed as joint global head of EZL, a specialist executive recruitment firm. In 2017, Ms Tillman announced she was leaving EZL’s employment to join one of its competitors. However, she was subject to restrictive covenants in her contract of employment, in particular a non-compete covenant which stated that she could not “directly or indirectly engage or be concerned or interested in” any business in competition with EZL.
Ms Tillman argued that the covenant was void as prohibiting her from being “interested” in a competing business attempted to prohibit her from owning even a small number of shares in such a company and was therefore unreasonably wide. EZL argued that the words “or interested” could be severed and removed in order to render the remainder of the covenant reasonable and therefore enforceable.
Decision
The Supreme Court decided that the words “or interested” could be severed so that the company could enforce the covenant against Ms Tillman. The court made the following key findings.
1. Senior employees are capable of causing a lot of damage to their ex-employer’s business interests by taking their knowledge and skills elsewhere and employers therefore need the protection of restrictive covenants.
2. Junior employees are not as equipped as senior employees to negotiate restrictive covenants before entering into them or defending claims for enforcement against them. The law must therefore be equipped to protect junior employees. Allowing employers to modify restrictive covenants to make them enforceable is contrary to this.
3. It is not the court’s role to rewrite covenants to make them enforceable. The court endorsed the ‘blue pencil’ test which is the principle that if the removal creates a need for the covenant to be modified or added to then the covenant is not severable.
Continued on page 2
First Supreme Court employment competition case in over 100 years
Welcometo the July 2019 edition of Employment Matters
Hello again from Clarke Willmott LLP’s Employment & HR team. Welcome to the July 2019 edition of Employment Matters.
For further information on any of the topics in this month’s Employment Matters, please contact a member of the Employment & HR team.
As ever, we welcome your feedback and if you would like to see a particular area or topic featured in future issues, please get in touch.
Kevin Jones Head of Employment & HR
Contents• First Supreme Court employment
competition case in over 100 years
• Does covert monitoring by an employee at work amount to misconduct?
• GDPR compliance in Employment Tribunal proceedings
Employment Matters
Employment Law Briefing July 2019
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Supreme Court decides to sever and remove part of a post-employment covenant to render the remainder enforceable against the employee
02 Employment Law Briefing July 2019
Bi rm ingham • B r i s to l • Ca rd i f f • London • Manches te r • Sou thampton • Taun ton
First Supreme Court employment competition case in over 100 years - continued4. Crucially, the removal of the provision should not generate any ‘major
change’ in the overall effect of all the post-termination covenants in the contract.
What does this mean for employers?
The Supreme Court stressed that it will not always be appropriate to sever restrictive covenants and they will use this power cautiously as employees also have a right to their livelihood which needs protection by the law.
Employers should not rely on the courts to step in and remove parts of restrictive covenants to make them enforceable. They should seek to ensure their restrictive covenants are enforceable from the outset rather than leave it up to chance as to whether or not the court will intervene. Employers should seek advice on drafting tailored enforceable restrictive covenants and contact our employment specialists should they need assistance.
In Phoenix House Limited v Stockman, Tatiana Stockman was employed by Phoenix House Limited (Phoenix) as a financial accountant until she was dismissed on 28 November 2013. Ms Stockman was called into a meeting with HR on 23 May 2013 to discuss her conduct after she forced her way into a private meeting between the Head of Finance, Director of Finance and one of her colleagues. In the meeting with HR, Ms Stockman was told she would be subject to disciplinary action. Unbeknown to Phoenix, Ms Stockman covertly recorded this meeting.
Ms Stockman was later dismissed and successfully brought a claim of unfair dismissal against Phoenix. However, in the course of preparing for the Tribunal hearing, Ms Stockman was obliged to make a transcript of the recording and disclose this to the other side.
Phoenix argued that, had it known about the covert recording at the time of the dismissal, it would have dismissed Ms Stockman for gross misconduct. Phoenix argued that Ms Stockman’s awards should be reduced accordingly.
Recording was not gross misconduct in this case
The Employment Appeal Tribunal heard Phoenix’s appeal but rejected it. It made a number of findings about covert recording by either an employee or an employer in the workplace.
1. It is good employment practice for an employer or an employee to say if there is any intention to record a meeting unless the circumstances are particularly “pressing”. The EAT commented that failure to do so is likely to amount to misconduct.
2. Phoenix argued that the covert recording justified dismissal as it was in itself a dishonest act and was therefore sufficient to destroy the relationship of trust confidence between Phoenix and Ms Stockman. The EAT commented that the act must be something “which so undermines the trust and confidence which is inherent in the particular contract of employment that the employer should no longer be required to retain the employee in employment”.
3. There are basic standards of behaviour that all employers will expect from their employees. However some employers may attach more or less importance to other standards of conduct. It is therefore important to consider each individual employer’s perspective when determining whether covert recording amounts to gross misconduct.
4. The EAT commented before everybody had a mobile phone on them at all times, it was much more difficult to make a covert recording. It could therefore more easily be assumed that a recording was made with the intention to entrap an employer.
5. It is now a much simpler task to make a recording by simply setting a mobile phone to record and putting it in your pocket. It correlates that the old assumption no longer stands that a recording is made with the purpose of entrapment. It may be done for a number of reasons, such as to simply keep a personal record, obtain advice or protect the employee if they are concerned that they may be misinterpreted during a meeting.
6. The purpose of a recording will always be relevant. In the first instance of this case, Employment Tribunal found that the Claimant did not make the recording for the purpose of entrapment and she made no use of the recording in the internal proceedings with the Respondent.
7. Covert recording is therefore not bound to be an act of gross misconduct. The EAT went further to comment that it will
be rare that the act of making a covert recording will appear on employers’ policy detailing acts of
gross misconduct.
Does covert monitoring by an employee at work amount to misconduct?
03 Employment Law Briefing July 2019
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Following the implementation of the General Data Protection Regulations (GDPR) and the Data Protection Act 2018 (the DPA), the way in which personal data is processed is now more important than ever.Along with general day-to-day operations, employers also need to ensure they are GDPR compliant in the event of employment tribunal proceedings. During the process of preparing for such proceedings, employers will need to ensure that they are processing personal data lawfully and in compliance with GDPR and the DPA.
What is personal data?
“Personal data” is any information relating to an identified or identifiable natural person (known as a “data subject”).
During the process of employment tribunal proceedings, employers will need to process (which includes collecting, organising, using and disclosing) information about the claimant and other individuals that will comprise “personal data”. This will include preparing and filing ET3 responses, preparing and exchanging witness statements, or disclosing documents.
Employers are deemed to be data controllers for the purposes of GDPR, which means that they must comply with the seven data protection principles when processing personal data.
What are the seven data protection principles?
1. Lawfulness, fairness and transparency – data should be processed lawfully, fairly and in a transparent manner;
2. Purpose limitation – the data should be collected for a specified purpose that is legitimate and explicit;
3. Data minimisation – data should be relevant, adequate and limited to what is necessary for the purpose it is processed;
4. Accuracy – reasonable steps should be made to ensure data is accurate and kept up to date;
5. Storage limitation – data should not be kept for a period that is longer than necessary for the purpose it is processed;
6. Integrity and confidentiality (security) – data should be processed in a manner that ensures security and protection against unlawful/unauthorised processing or accidental loss/damage; and
7. Accountability – data processors should take responsibility for complying with the principles by having appropriate records and processes in place to demonstrate compliance.
Complying with the data protection principles during employment tribunal proceedings
An exemption from the data protection principles may apply during the context of employment tribunal proceedings. However, exemptions can be complex and should not be routinely relied upon.
Therefore, to assist employers in complying with the data protection principles during employment tribunal proceedings, employers should consider the extent to which the following methods can be used to attempt to reduce any personal data contained in documents:
1. Pseudonymisation involves processing personal data in such a way that it can no longer be attributed to a specific data subject without the use of additional information. For example, a name could be replaced with a number.
2. Anonymisation means a data subject will no longer be identifiable. Employers should note that when anonymising personal data it will still be classed as processing it and if at any point the reader could re-identify the individual, it has not been successfully anonymised.
3. Redaction is the process of obscuring or ‘masking’ text. Parties to an Employment Tribunal claim are permitted to redact information if it does not meet the test for standard disclosure, as long as it does not destroy the sense of the document or make it misleading.
Employers should note that methods to reduce personal data should be approached with caution as ‘reading between the lines’ may reveal the identity of third parties associated with other facts available in the disclosure.
Our Employment Team regularly represent employers in Employment Tribunal proceedings and advise on data protection in context of employment law. Please contact our team if you would like assistance in this area.
GDPR compliance in Employment Tribunal proceedings
“Personal data” is any information relating to an identified or identifiable natural person (known as a “data subject”).
04 Employment Law Briefing July 2019
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