We argued, on behalf of our client,
that the employee had failed to comply with the
statutory grievance procedure (unless exceptions
apply, an employee cannot bring a claim in an
Employment Tribunal based on constructive
dismissal if he or she has not first submitted a
grievance and waited 28 days to provide the
employer with the opportunity to respond). Whilst
the employee in this case had submitted a
grievance in relation to the first ground, he had
failed to submit a written grievance in relation
to the other three grounds he relied on in support
of his claim for constructive dismissal. We argued
that there was no authority for a 'severed' or
partial approach which would permit the claim to
proceed on the basis of a grievance about only one
of those grounds.
The EAT agreed with us. There was no
such authority which would allow a tribunal to
take a severed or partial approach. The grievance
submitted by the employee was not the same as the
complaint presented to the Employment Tribunal and
therefore it did not have jurisdiction to hear the
constructive dismissal claim.
Whilst our argument in this case
focused on the technical aspects of the statutory
procedures (and also involved considering the
issue prior to the procedures coming into force),
it provides a useful reminder for handling claims.
If an employee submits a claim for constructive
dismissal, it is vital to check whether a written
grievance has been submitted in relation to all
the grounds identified in the claim. If the
statutory grievance procedure has not been
complied with in this way, it may well strengthen
the argument that the tribunal does not have the
jurisdiction to hear the employee's claim at all.
Focus on
intellectual property - is your organisation
protected?
The newspapers recently reported that a
former employee at Coca-Cola was sentenced to
eight years in prison for attempting to sell trade
secrets to Pepsi for $1.5 million. Whilst
Coca-Cola was successful in protecting its secret
ingredients, not all employers are as lucky.
Unfortunately, protecting
confidential information and trade secrets is not
always a priority for an employer, particularly at
the outset of an employment relationship. However,
as demonstrated by the employee at Coca-Cola,
employees do not always act in the best interests
of their employer. In fact, a growing number of
employees and directors are taking steps to
compete with their employer while still employed
or in office. Such steps can have a detrimental
effect on an organisation, exposing its
confidential information, trade secrets and
intellectual property, and potentially damaging
its reputation in the market and ongoing
profits.
Two recent cases have brought these
issues to the fore, emphasising the importance of
protecting your business from the outset. They
address the implied duty of fidelity (which
imposes an obligation on employees to provide
honest, loyal and faithful service during
employment) and the fiduciary duty (which
generally applies to employees who are also
directors, requiring them to act solely and
exclusively in the interests of the
employer).
In Shepherds Investments
Limited and anor v Walters and ors, a group
of employees and directors, whilst still employed
by Shepherds Investments, and without its
authorisation, planned to set up a business which
focused on a slightly different section of the
life insurance market. They produced a draft
business plan, contacted lawyers and financial
institutions and prepared financial predictions.
Having made most of the preparations, the group
resigned and set up in competition. Shepherds
Investments brought claims against its former
employees for breach of the fiduciary duty and the
implied duty of fidelity.
The Court confirmed that directors
are under the duty to act in good faith and in the
best interests of the company, and should not
place themselves in a position in which their own
interests conflict with that of the company. The
precise point at which preparations for setting up
and running a competing business becomes unlawful
turns on the actual facts of each case. In
this case, the directors and employee of Shepherds
Investments had formed the irrevocable intention
to establish a competing business at the point
they engaged solicitors to set up the new company.
From this point onwards, the directors were in
breach of their fiduciary duty to promote the
company's best interest in good faith, and the
employee was in breach of the duty of fidelity.
Meanwhile, in Helmet Integrated
Systems Ltd v Tunnard, a salesman came up
with an idea for a new safety helmet for
fire-fighters. He took steps to advance this idea,
and left the employer, forming his own company two
months later, to develop the new design.
The Court of Appeal noted that
whilst an employee must not compete with his
employer during the course of employment, the
employee's duty of fidelity does not prevent him
from competing with the former employer once he
has left employment. This freedom to compete, once
the employee has left, carries with it a freedom
to prepare for future activities, which the
employee plans to undertake once he has left. The
Court confirmed in this case that the employee was
not under a contractual or fiduciary duty to
inform the employer of his own (as opposed to a
competitor's) preparatory activities or of any
such activities undertaken on his behalf.
Significantly, his job specification did not
restrict his freedom to prepare for competition on
leaving. The employer had therefore failed to
establish any breach either of the obligation of
fidelity or as a fiduciary.
The above
cases demonstrate that, without adequate
protection of confidential information, trade
secrets and general intellectual property rights,
employers risk exposure to damaging competitive
activity. Whilst Shepherds Investments
offers some comfort to employers, by showing that
preparatory work can be found to be in breach of
fiduciary and fidelity duties, it is vital that
employers address the risk of competitive
activities and protect their intellectual property
rights before litigation becomes necessary.
We work closely with our IP group in this area.
They provide our clients with an invaluable "IP
audit" to prevent, as far as possible, such issues
arising or reaching the litigation stage. Click
here for further information.
Without prejudice
discussions
In
an earlier
update, we reported on the decision of the EAT
concerning the admissibility of 'without
prejudice' (often referred to as 'off the record')
settlement discussions in tribunal proceedings.
This case was recently heard in the Court of
Appeal, which has now provided further
guidance.
In Brunel University and anor v
Vaseghi and Webster, two employees made
separate complaints of race discrimination and
'without prejudice' settlement discussions took
place immediately prior to the tribunal hearing.
Following this litigation, both employees brought
grievances based on the employer's newsletter,
which referred to their 'unwarranted demands for
money'. The employees claimed this was
victimisation. Their grievances were heard by an
independent committee, and oral evidence was given
about the settlement discussions which took place
prior to the tribunal hearing. This evidence was
also referred to in the committee's report on the
grievance. Both grievances were rejected and the
employees initiated tribunal claims for
victimisation. The employer argued that the
employees could not rely on the 'without
prejudice' communications to progress their
claims.
Noting the unusual facts of the case,
the Court of Appeal confirmed that the EAT had
been justified in its decision that there had been
a waiver in respect of some 'without prejudice'
negotiations and that evidence of those
negotiations could be admitted in proceedings. The
Court refused to rule on whether there is a
particular exception to the rule relating to the
'without prejudice' privilege which applies only
in discrimination and victimisation cases (as had
been suggested in parts of the decisions of the
Employment Tribunal and EAT) but did acknowledge
it may sometimes be difficult to prove
victimisation if remarks made in the course of
'without prejudice' discussions can never be
referred to.
As we recommended following the EAT
decision, it is advisable to continue assuming
that 'without prejudice' discussions will not
always attract complete protection from
disclosure. It remains best to assume that there
is no such thing as "off the record" conversations
with employees even in the context of 'without
prejudice' settlement discussions.
Agency -
lack of detailed control over workers
In Consistent Group Ltd v Kalwak
and ors and Welsh Country Foods Ltd, the EAT
has confirmed that a tribunal had been entitled to
hold that agency workers were employed by an
employment agency, even though the agency had no
detailed control over their day-to-day work.
The EAT considered that two of the
essential ingredients for a contract of
employment, personal service and mutuality of
obligation, were present as between the agency
workers and the agency. In relation to the issue
of control, whilst the agency had limited control
over the day-to-day work of the agency workers,
the EAT upheld the tribunal's finding that the
agency still had significant control over their
working lives. The agency told the agency workers
what to do, where to go and transport and
accommodation were provided in circumstances where
the agency workers were not, in reality, in a
position to refuse them.
Whilst a lack of detailed control over
the work carried out by agency workers is usually
a decisive factor against
inferring an employment relationship between an
employment agency and a worker, it is not always a
necessary condition. In this case, the fact
that the agency did not have day-to-day control
over the agency workers' work did not mean that a
contract of employment could not exist between
them and the agency.
Dispute
resolution supplementary review
The DTI has issued a new supplementary review,
to operate alongside its consultation 'Success
at work: Resolving disputes in the workplace',
which is seeking views on the proposed repeal of
the statutory dispute resolution procedures (see
our earlier
update).
The review invites views on options to
amend section 98A of the Employment Rights Act
1996 (which relates to procedural unfairness in
unfair dismissal claims), if the statutory dispute
resolution procedures are to be repealed. The
closing date for responding to this review is 20
June 2007.
Steps
taken to tackle gender inequality in
pay
80 per cent of employers claim to
be tackling the inequalities in pay between men
and women, according to a recent survey conducted
by Opportunity Now.
The survey of 94 employers in the
public, private and education sectors has revealed
that nearly one third of employers have effective
structures in place to tackle segregation in
gender-specific jobs. These include specific
recruitment drives, job shadowing, open days and
senior management commitment to
change.
Internal grievance
procedures are flawed
Employees
who have tried to resolve disputes about
discrimination under new equality regulations have
ended up facing demotion, dismissal, mental health
problems and even contemplated suicide, according
to recent research.
In
the first study of the impact of the employment
equality regulations on sexual orientation and
religion or belief, which were introduced in 2003,
research carried out by the Institute for Employment
Studies for ACAS, suggests that internal
workplace grievance procedures are 'flawed' and do
not provide a way to resolve these issues.
The study highlighted how following
internal grievance procedures to resolve disputes
within organisations were regarded as being
'futile' by the claimants. Complaints were made
about how the submission of a grievance by an
employee was often triggered by disciplinary
action by employers and how they could work
against achieving a satisfactory resolution. It
was also thought to be difficult to find
colleagues to represent them, that there were
often unnecessary delays and the involvement of
unsuitable managers who, in a number of cases,
were felt to have been complicit or active in the
original discrimination experience. Overall,
claimants felt they did not receive a fair hearing
at internal grievance procedures.
Work Wise
UK Quality Mark
Sir Digby Jones, UK Skills Envoy
and former director general of the CBI, has
launched the new Work Wise UK Quality
Mark. The new quality mark is intended to
allow an organisation to gain recognition for its
successful introduction of new smarter working
practices in the workplace.
The new Work Wise
Quality Mark will be assessed using the Work Wise
UK Standard, which has been developed over a
12-month period, in collaboration with the TUC and
other bodies. Assessment for the quality
mark will normally take two days and will require
an organisation to demonstrate:
-
understanding and use of smarter
working techniques as a strategic planning tool
-
staff involvement in defining future
strategies
-
vision in planning for the future
Call for
new Community Day bank holiday
Leading voluntary organisations have
joined with the TUC to call for a new national
bank holiday in October to celebrate and promote
community activity and involvement.
The TUC, the National Council for
Voluntary Organisations, Community Service
Volunteers, Volunteering England and the National
Association for Voluntary and Community Action
have said that a new bank holiday should be used
to help build the Government's 'vision of a
society where voluntary activity flourishes and
where all individuals and communities are enabled
to play a full part in civil society'.
Promote
people not stereotypes
The Equal Opportunities Commission
(EOC) has launched its 'Promote people not
stereotypes' campaign, to 'bust the
myths' surrounding Bangladeshi, Pakistani and
Black Caribbean women in the workplace.
The campaign features successful
Asian and black women, including those who have
thrived in traditionally male-dominated
professions, and those who have broken through the
glass ceiling into the boardroom.
Subscribe now
If
you have received this update from a colleague and
wish to receive it yourself on a fortnightly
basis, just click here to
subscribe.