Four senior executives resigned from the same employer, Cantor Fitzgerald , on the same day. The resignation letters were virtually identical. That same day, those four senior executives signed employment contracts with the same competing company, Mansion House . The employment contracts were reviewed by the same law firm on behalf of each executive. The terms of employment were the same, save for salary, residence and title. Acting in concert? Breach of duty? The Hong Kong Court of First Instance said no… Or to be more precise, not necessarily . Here are the key points to take from this interesting case.
Right to resign: The freedom of choice of occupation is recognised in Hong Kong. Therefore even though an employee must not act contrary to his employer’s interests, an employee still has a right to resign from his job to work elsewhere as he likes. This applies equally to employees at senior level, e.g. company directors.
Circumstantial evidence is not enough: Each executive knew that the other was thinking of resigning to join Mansion House. The Court declined to infer from this alone that the executives acted in concert or procured each other to resign. The evidence was not sufficient to demonstrate a co-ordinated effort among all the executives.
Not every executive is a fiduciary: A person who accepts a position of trust and confidence in respect of the property and affairs of another is likely to be considered a fiduciary – a legal term of art. A fiduciary is subject to a very high standard of care. Two of the executives were “Managing Directors”. They acted as co-heads of Cash Equities Desk of Cantor Fitzgerald, and managed the brokers working under them. However, they were not members of the board of directors of Cantor Fitzgerald, and had no involvement in the general management of the company. Their duties to Cantor Fitzgerald arose from their employment contract only.
Using the same lawyer is acceptable: All four executives instructed the same lawyer to negotiate their employment terms with Mansion House. The Court was convinced that the measure was merely for common sense convenience to save cost and avoid unnecessary duplication of work. Hence it did not infer concerted actions of the executives to resign from this fact.
To each his own – the independent decision: The Court decided that the executives made their own decisions whether to resign or not independently. The winning argument was that if the executives had a co-ordinated plan, they would have marketed themselves to Mansion House as a “package deal” with defined roles according to their seniority at Cantor Fitzgerald. The fact that Mansion House appointed one of the executives, who was more junior compared to the others, to be the new CEO to head his former boss and co-workers indicated that it was not a co-ordinated team move.
Who is your competitor? Mansion House was financially backed by a wealthy white knight. With experienced senior executives joining the firm, it was essentially a well-qualified rival to Cantor Fitzgerald. However the Court was of the opinion that Mansion House could not be regarded as a competitor of Cantor Fitzgerald because the former is a start-up company while the latter is long-established.
An interim injunction is not the end: Before the trial started, the judge granted interim injunctions in favour of Cantor Fitzgerald based on restrictions contained in its employment contracts with the executives. As a result the executives had been prevented from working in a competing business during the interim period before judgment was given. After hearing all the facts at trial, the judge made a final decision against Cantor Fitzgerald and ruled the restrictions, which he based his interim decision on, unenforceable.
12 months is too long: A post termination restriction can only be enforced if its scope is justified to be reasonable. In this case the non-compete restrictions had a 12-month duration which was held too long. Cantor Fitzgerald was unable to justify why 12 months were needed to replace an employee. There was no statistics provided as evidence, e.g. the time needed by the company to locate and train suitable employees in replacement in the past.
 Intended to refer to the Cantor Fitzgerald group of companies.
 Full name, Mansion House Financial Holdings Limited, and intended to refer to the Mansion House group of companies.
 Cantor Fitzgerald Europe v Jason Jon Boyer  HKEC 301
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This item is part of the the Asia Employment Law Update for November 2012, read more articles related to this: