Latest Employment Law case updates - Edition 5 2020

By Alison Dixon, Tim Spillane, Ian Hunter, Elizabeth Lang

07-2020

Latest Employment Law case updates - Edition 5 2020

1. Square Global Limited v Julien Leonard [2020] EWHC 1008 (QB)
2. Hamam v (1) British Embassy in Cairo & (2) Foreign and Commonwealth Office UKEAT/0123/19
3. UQ v Marclean Technologies, S.L.U. (Case C-300/19) (2019/C 295/06)


1. Square Global Limited v Julien Leonard [2020] EWHC 1008 (QB) (Link)

In this case, the High Court found that a six-month non-compete clause in a broker's contract of employment was justified and therefore enforceable, in addition to a six-month notice period.  The broker had not been constructively dismissed and therefore could not argue that the covenant was not binding on him as a result of a repudiatory breach of contract by his employer. 

Mr Leonard worked as a senior broker with Square Global Limited ("Square"), an inter-dealer and agency broking business.  His employment contract, which he had negotiated with Square, contained a six-month notice period and a six-month post-termination non-compete covenant (amongst other restrictions). The non-compete prevented him, for six months after the termination of his employment, from being involved in any business concern which was (or intended to be) in competition with Square.  In November 2019 Mr Leonard summarily resigned, alleging constructive dismissal.  For seven months prior to his resignation, he had been in discussions regarding a role with a rival company. 

Square issued proceedings seeking (i) a declaration that Mr Leonard remained employed for the duration of his six-month notice period; and (ii) an injunction requiring him to comply with the non-compete covenant for a further six months, such that he was prevented from joining his new employer for a total of 12 months from the date of his resignation.    

The Court:

  • rejected Mr Leonard's assertion that he had been constructively dismissed.  His claim that Square had acted in repudiatory breach of his contract of employment, entitling him to "accept" that breach, resign, and treat himself as discharged from any further obligation under his employment contract, did not succeed.  Although the Court commented that some of the behaviour of Mr Leonard’s colleagues in the workplace (including swearing and shouting) had been inappropriate and wrong, it did not find that this rendered the workplace so unpleasant as to amount to a repudiatory breach of contract.  The Court also found that written complaints about alleged bad behaviour in the office, made very shortly before he began discussions with his new employer, had been written by Mr Leonard with an eye on creating material that might prove useful in an employment dispute rather than because there was in fact an unacceptable environment at Square;
  • declared that Mr Leonard remained Square's employee for the duration of the notice period (until May 2020), notwithstanding his purposed resignation; and
  • held that the non-compete clause was justified and enforceable. In doing so, the Court found that Square had a legitimate, protectable interest as Mr Leonard's job involved exploiting customer connections and confidential information, something Square had a legitimate interest in protecting. Furthermore, the six-month period went no further than was necessary to protect Square's legitimate interests. The Court pointed to the fact that Mr Leonard's employment contracts with both his previous employer and his new employer also contained a six-month non-compete restriction, and that he had negotiated his contract with Square. Finally, the Court concluded that even though Mr Leonard was "off the market" from the date of his purported resignation and throughout his notice period, this was not a sufficient reason to set off that period against the six-month term envisaged by the non-compete clause. 

This decision is a helpful reminder that it is not always necessary for a period of notice to be "set off" against the period of a post-termination restriction: in some cases, a combined period of restriction covering both the notice period and a period after the termination of employment may be reasonable.  It also demonstrates that the Courts will give short shrift to individuals attempting to avoid their contractual obligations by constructing artificial or exaggerated allegations of bad behaviour in order to bolster a claim of repudiatory breach.  


2. Hamam v (1) British Embassy in Cairo & (2) Foreign and Commonwealth Office UKEAT/0123/19 (Link)

In this case, the Employment Appeal Tribunal ("EAT") upheld an earlier Employment Tribunal decision that an Egyptian citizen, living in Egypt and engaged to work at the British Embassy in Cairo, could not bring claims under English employment protection legislation. 

The Claimant was employed as a Vice Consul at the British Embassy in Cairo.  Upon termination of her employment she brought claims in the Employment Tribunal ("ET") for race discrimination, victimisation, unfair dismissal and whistleblowing detriment.  The ET judge held that the Claimant's employment was insufficiently connected to Great Britain, citing a range of factors in support of this conclusion, including that she was recruited in Egypt, worked permanently and predominantly in Cairo, was an Egyptian national and paid tax in Egypt. 

The Claimant appealed to the EAT on numerous grounds, including that the ET had not properly considered the argument that the embassy was a "British enclave".  The "British enclave" was an example given by the House of Lords in Lawson v Serco, of a scenario in which an employee working outside the UK might benefit from the protection of British employment law, on the basis that the "territorial pull of the place of work" is overridden by factors connecting the employment to Great Britain that are sufficiently strong to justify protection being afforded under British employment law. 

The EAT dismissed the appeal.  In doing so it held, amongst other things, that an employee who works in a "British enclave" is not automatically brought within the jurisdiction of British employment law. The EAT found that the ET judge's role in this type of case was to look at the nature of the British Embassy and to take that into account as one of the factors relevant to the question of whether a person working abroad has a "sufficient connection" with Great Britain and British employment law.  The fact that it might be deemed to be a "British enclave" was not, of itself, a determining factor, and the ET had not made an error in failing to consider whether the embassy was a British enclave.

This case highlights the extremely fact-specific nature of the analysis that is undertaken when determining whether an overseas-based employee is entitled to protection under British employment law.  All of the circumstances must be taken into account to determine whether the employment has a sufficient connection with Great Britain and British employment law to justify such protection. 

3. UQ v Marclean Technologies, S.L.U. (Case C-300/19) (2019/C 295/06) (Link)

The Advocate General's opinion in this European Court of Justice ("ECJ") case has considered the period over which redundancies are counted in order to determine whether the relevant threshold for collective redundancy consultation has been satisfied. 

Council Directive 98/59/EC (the "Directive") concerns collective consultation in relation to "mass" redundancies. The obligation to carry out collective consultation under the Directive applies when a number of conditions are satisfied, including a condition regarding the number of dismissals that take place over a given period (of 30 or 90 days, depending on the choice made by each Member State). The UK legislation on collective redundancies (section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992) applies where 20 or more redundancies are proposed within a 90-day period.   

The applicant, UQ, worked in Spain for Marclean Technologies ("Marclean") until her dismissal in May 2018. In June 2018, UQ brought a claim for unfair dismissal, arguing that her dismissal formed one of a number of "covert" collective redundancies. She noted that between 31 May and 14 August 2018, seven people had ceased working for Marclean, in addition to a further 29 people on 15 August 2018 (each of these employees having submitted a letter of resignation on 26 July 2018). The national court referred the case to the ECJ, questioning whether employers (i) must only consider terminations of employment which took place in the 90 days prior to the date of the individual dismissal, or (ii) must also consider terminations taking place in the 90 days subsequent to that date, when determining whether the threshold for collective consultation has been met.

The Advocate General has given an opinion that the relevant 30- or 90-day period is a rolling period. As such, to determine whether a dismissal is subject to the collective consultation duty, employers are required to look both backwards and forward (over the relevant 30 or 90 days) to determine whether the threshold number of redundancies is met over the reference period. If the worker was dismissed within a consecutive 30- or 90-day period, however calculated, and the total number of redundancies within that period reaches the required threshold, the obligation to consult collectively under the Directive will be triggered.

The ECJ will now make a decision. It normally follows the Advocate General's opinion, and if so the case will confirm the need for employers effecting redundancies in "batches" of fewer than 20 at a time to take particular care to ensure that they do not inadvertently cross the threshold number of redundancies over a 90 day period, thus triggering collective consultation obligations in relation to all of the redundancies within that period (some of which may already be underway).  Careful planning, with a clear understanding of both past and anticipated staffing reductions across the whole of an employer's business, is key to the assessment of whether the duty to collectively consult has been triggered.