UK Employment Law case updates - July 2017

Latest UK Employment Law case updates - July 2017

1. Whistleblower succeeds complaining about low commission
2. Pier pressure: overseas employees must be consulted
3. Six-month non-compete valid against a "star" junior employee

Chesterton Global Ltd (t/a Chestertons) v Nurmohamed [2017] EWCA Civ 979

The Court of Appeal ("CA") has confirmed that a contextual approach is to be taken when determining whether a disclosure is made in the reasonable belief that it is in the public interest, so as to entitle the discloser to statutory whistleblower protection under the Employment Rights Act 1996 (“ERA”).

Mr Nurmohamed had made repeated complaints to senior directors regarding discrepancies in his employer’s monthly accounts that were causing his and around 100 other managers' commission payments to be reduced. He was subsequently dismissed and, after bringing various employment claims, was found to have been automatically unfairly dismissed on the grounds of having made protected disclosures. The decision was upheld by the EAT.

The CA has clarified that, when presented with whistleblowing cases, tribunals should focus on the reasonableness of an individual’s belief, rather than the abstract definition of public interest. This will require an assessment of whether: (1) the worker genuinely (and subjectively) believed that their disclosure was in the public interest at the time it was made; and (2) that such a belief was objectively reasonable. The particular reasons for the worker's belief are not material and the tribunal should not 'substitute its own view' for that of the worker since ‘…a belief may be reasonable even though it is wrong’.

The CA concluded that parliament had left the term ‘public interest’ intentionally undefined, since it does not ‘lend itself to absolute rules’. Instead, it was a factual concept to be applied flexibly ‘as a matter of educated impression’, to exclude matters raised solely in the private and/or personal interest of the relevant worker. The number of affected individuals (100 managers in this case); the type of interests affected; the nature of the wrongdoing; and the identity of the alleged wrongdoer may all be useful pointers. In this case, the CA found in favour of Mr Nurmohamed.

While the decision does not provide certainty to employers, it does offer some useful guidance for when employee complaints should be treated as protected disclosures. It also demonstrates the importance of ensuring robust whistleblowing policies are in place. Given the outcome of this decision, a sensible policy may be to treat all employee disclosures which address more than mere private issues as protected disclosures pending further investigation. 

Seahorse Maritime Limited v Nautilus International (UKEAT/0281/16)

The EAT has held that employees who can demonstrate a sufficiently strong connection with the UK will be entitled to collective consultation in a redundancy situation.

Seahorse Maritime Limited ("Seahorse") employed crews of various nationalities to operate a fleet of ships owned by Sealion Shipping Limited ("Sealion"). These ships largely remained stationary outside UK or European territorial waters, with only a limited number making international voyages. In 2015, Sealion decided to take four of its UK-based ships out of service, leaving a group of crew members redundant.

Nautilus International (a trade union) subsequently brought a claim against Seahorse for breach of collective redundancy requirements, notably the obligation to consult with affected employees, when there is a proposal to dismiss 20 or more employees at one establishment within a 90 day period. Nautilus argued that the UK-domiciled employees of Seahorse were entitled to a protective award of 90 days' pay. The ET upheld the claim, deciding that all of the ships on which the redundant employees had been employed had to be considered together as one establishment. As such, collective consultation obligations applied to the UK-domiciled employees employed on those ships, even though they were working outside of the UK when they were made redundant.

On appeal, the EAT agreed that each vessel was not an “establishment”; and rejected Seahorse's argument that the ET did not have jurisdiction to hear the claims. It held that the connection to the UK and UK employment laws of the individual employees, and not the establishment, should determine whether the ET had jurisdiction over the claim. As Nautilus had restricted the scope of its claim to UK-domiciled employees whose contracts were governed by English law, the EAT upheld the first instance decision.

This case makes clear that before carrying out mass redundancies employers should think broadly when defining the "establishment" in which the dismissals will take effect and that should include considering whether overseas employees may be deemed to have sufficient connection to the UK that they should be counted for the purposes of determining whether the collective consultation obligations are triggered.

Egon Zehnder Ltd v Mary Caroline Tillman [2017] EWHC 1278 (Ch) 

The High Court has reviewed the principles for assessing whether a non-compete clause was necessary in order to protect legitimate business interests, and has set out guidance when establishing the validity of the non-compete clause.

In 2004, Egon Zehnder, a global executive search and recruitment company, employed Mrs Tillman, the defendant, as a consultant in its financial services group. Mrs Tillman had previously worked as a successful investment banker and was rapidly promoted to Partner in 2009 and co-Global head of the Financial Services Practice Group in 2012. However, she did not sign any new employment contracts throughout this period. Her existing contract contained a restrictive covenant which intended to restrain Mrs Tillman from working for a competitor of Egon Zehnder for a period of six months from the termination of her employment.

When Mrs Tillman's employment ended in 2017, she informed Egon Zehnder that she intended to work for an American firm in a similar area of business. Egon Zehnder sought an injunction based on the non-compete clause in Mrs Tillman's contract. She argued that the clause was void for being wider than reasonably necessary for the protection of Egon Zehnder's business interests, particularly in light of her original duties as a junior consultant and the principle that the reasonableness of a covenant should be judged on the circumstances that existed at the time into which the contract was entered.

The High Court upheld the covenant, accepting that Egon Zehnder did have legitimate business interests to protect as a result of Mrs Tillman's strong client connections and unique access to confidential information. The High Court noted the Defendant had been identified as a future star when she was recruited and was considered to be a “bit special” in that she had greater client involvement and made more sophisticated contributions to the organisation’s strategy than a typical consultant.

The case is somewhat unusual and turned on its particular facts. Employers should certainly not assume that an onerous non-compete imposed on a junior member of staff will be enforceable many years later. However, it does show that covenants, which may on their face appear unreasonable, can be justifiable in specific circumstances. Employers should continue to ensure that restrictive covenants are tailored to a role/person and updated as appropriate to reflect changing circumstances.