Employment Review - March 2007
In this month’s Review we identify some interesting cases including: whether the UK has adequately implemented the EC directive against discrimination on the grounds of age; how employers are prohibited from taking into account expired disciplinary warnings when determining a sanction for subsequent disciplinary problems; and a warning shot about dealing with work-related stress. There is, however, some good news on non-competition restrictive covenants! We hope you enjoy and find it useful.
12 Month Non-competition Clause In Employment Contract Upheld
Recent Work
Are Compulsory Retirement Ages Lawful?
Expired Disciplinary Warnings Cannot Be Taken Into Account
Employer Liable In Negligence For Work Related Stress
Employment Protection Insurance Scheme
Annual Increase In Statutory Compensation Limits
12 Month Non-competition Clause In Employment Contract Upheld
Some rare encouraging news on the restrictive covenant front for employers. The Court of Appeal has held that a 12 month noncompetition clause for a managing director was enforceable.
The Managing Director had sought to argue that a covenant preventing him from being engaged in a competing business for a period of 12 months posttermination was an unreasonable restraint of trade. Both the High Court and the Court of Appeal disagreed with him.
The case has not set any new precedent from a legal or factual point of view. However, it is interesting because the Courts have indicated a willingness to tolerate 12 month restraints providing the employer can demonstrate that the clause is necessary to protect a legitimate business interest. It was particularly interesting to note that there were standard non-solicitation and confidentiality clauses in the managing director’s service agreement but the Courts took the view that those clauses did not afford the employer the necessary protection and an additional noncompetition clause was justifiable.
Whilst the general trend of enforcement in non-competition clauses has been in favour of the employee, the fact that the managing director lost both in the High Court and in the Court of Appeal confirms that carefully drafted covenants will receive judicial support where justified.
Thomas V Farr Plc & Hanover Park Commercial Limited
We have recently:
- Provided workshop training under the Work and Families Act 2006;
- Provided a seminar on updates to discrimination law;
- Prepared a standard No-Smoking Policy for clients ahead of the workplace smoking ban on 1st July;
- Successfully defended an unfair dismissal claim and obtained costs against the Claimant;
- Advised on collective redundancy consultation procedures for over 200 staff;
- Dealt with the annual fall out from Office Christmas Parties!
Are Compulsory Retirement Ages Lawful?
A Spanish Court has just referred a question to the European Court of Justice as to whether a compulsory retirement age in domestic law was lawful in light of Article 2(1) of the Equal Treatment Framework Directive - the provision which requires member states to enact legislation to prevent discriminatory treatment on the grounds of age.
It is usual in such referrals to the ECJ for the Advocate General to give an Opinion which the ECJ subsequently follow (but the Court is not bound to). The Advocate General has given an Opinion in this case to the effect that the principle of non-discrimination on grounds of age set out in Article 2.1 does not apply to member states when setting retirement ages. Further, the Advocate General’s Opinion states that even if the Equal Treatment Directive did apply to national laws, a general retirement age under national laws can be justified under Article 6.1 of the Equal Treatment Directive i.e. retirement ages can be objectively justified.
The Spanish case was referred to the ECJ a few weeks before the UK courts referred the Heyday case to the ECJ on a similar point.
It will be very interesting to see whether the ECJ does follow the Advocate General’s Opinion. If it does, it seems unlikely that Heyday will succeed in its challenge to the ECJ that the Employment Equality (Age) Regulations 2006 are unlawful. It if does not, the UK government will have to make significant amendments to the Age Discrimination Regulations.
Watch this space!
Expired Disciplinary Warnings Cannot Be Taken Into Account
The EAT has held that expired disciplinary warnings must be ignored when deciding what disciplinary sanction to give an employee.
As practitioners are aware, there are conflicting lines of cases on this subject but we now have EAT authority for the proposition that expired disciplinary warnings should not be taken into account. This is a particularly powerful decision given that the Judge is the President of the EAT and he actively considered the conflicting cases.
Airbus UK Limited V Webb
Employer Liable In Negligence For Work Related Stress
The Court of Appeal has rejected an employer’s appeal from the High Court’s decision that it was liable for the personal injury suffered by an employee as a result of work related stress - notwithstanding the fact that the employee complained that the levels of stress suffered were intolerable but failed to resign.
The 2 important points from this case are:
- The Court of Appeal indicated that a trial judge should always carry out a fact finding investigation in each case; and
- An employer should not proceed on the basis that referring the employee to counselling and following any guidance would necessarily satisfy its duty of care to the employee.
The leading case on this issue, Sutherland v Hatton, still contained the guiding principles but this case is unsettling in that it reduces the protection offered to employers when simply following the guidance of a counselling service.
Intel Corporation (Uk) Ltd V Daw
Employment Protection Insurance Scheme
Here at Freeth Cartwright we are in the process of re-launching our Employment Protection Insurance Scheme.
The scheme is designed to give employers financial certainty in quantifying employment claims risks whilst guaranteeing you, the employer, access to top quality legal advice from individuals you know and trust. In return for a very competitive monthly premium employers are protected against employment related claims and the costs of defending/pursuing those claims providing our advice is followed. The difference with this product is that you know us, we know you, and we have a “can do” approach to employers’ problems which other insurers shy away from!
Please contact us for further information.
Annual Increase In Statutory Compensation Limits
A reminder! The annual increase in statutory limits took effect on 1st February 2007. The maximum compensatory award is now £60,600 and the cap on a week’s pay is now £310 for termination effective after 1st February 2007.
For further details on all the current limits please ask us.