A number of key employment law cases of significance for employers have recently been decided.
Settlement agreements, COT3 & misrepresentation
Cole v Elders Voice
In November 2020 the Employment Appeal Tribunal handed down judgment upholding an appeal in the case of Cole v Elders Voice.
Mrs Cole’s employment transferred to Elders Voice under the Transfer of Undertakings (Protection of Employees) Regulations 2006.
Mrs Cole brought a claim for unfair dismissal and race discrimination against the transferor, a predecessor organisation of the respondent.
Following the transfer, Elders Voice then placed Mrs Cole at risk of redundancy and settlement discussions commenced.
During the negotiations, Mrs Cole was represented by an individual who all parties believed to be a practising barrister (it later transpired the individual had been struck off). The individual put questions about the legal implications of any settlement agreement on the litigation to Elders Voice in correspondence marked “without prejudice”.
A COT3 was then signed, apparently settling the actual or potential claims, with Elders Voice inserting wording into the agreement at the request of the claimant’s representative to confirm that they had ‘no connection’ with the transferor.
Following the signing of the COT3, Elders Voice applied to have Mrs Cole’s claims struck out on the basis that they had been compromised by the COT3.
A preliminary hearing took place to determine whether the tribunal had jurisdiction to hear the claim, notwithstanding the COT3.
While there was no official note of the hearing, at which Mrs Cole appeared unrepresented, but it seems the tribunal did not refer to the pre-COT3 without prejudice documents following an objection by counsel for the respondent. As a result, the ET concluded that the settlement in the COT3 could not be challenged, and Mrs Cole’s request for reconsideration was refused.
Mrs Cole appealed on various grounds, including that the ET had erred in failing to look at the without prejudice material before deciding that the COT3 was valid.
On appeal, the Tribunal found in favour of Mrs Cole on the key issues, namely, that:
- Tribunals do have a jurisdiction to challenge COT3 and Settlement Agreements on common law and equity grounds such as misrepresentation or estoppel (Industrious Ltd v Horizon Recruitment Ltd [2010] IRLR 204)
- Mrs Cole had made clear references to misrepresentation and estoppel at the preliminary hearing and should have been allowed to refer to documents marked without prejudice correspondence to make those submissions.
- The involvement of someone (wrongly) holding themselves out as a barrister did not preclude the tribunal from accepting the claimant’s arguments.
The tribunal remitted the underlying questions of misrepresentation, estoppel and construction of the COT3 to a differently constituted tribunal for rehearing.
This case highlights a number of risks when negotiating settlement agreements. It confirms established law that COT3s and settlement agreements can be voided at tribunal under common law for misrepresentation, or that a party may be estopped from relying on its terms.
Importantly, employers and their representatives cannot negotiate settlements on the assumption that the other party (even where seemingly professionally represented) must themselves identify and not ‘miss’ any potentially misleading communications. Where actionable representations and assurances are made about the effect of a settlement are given, these must be accurate in context and viewed as a whole, and not simply in a literal sense.
Professional misconduct verdict overturned
Ryan Beckwith v Solicitors Regulation Authority
The High Court has overturned the Solicitors Disciplinary Tribunal’s finding that lawyer Ryan Beckwith had breached professional conduct standards.
Mr Beckwith resigned as a partner at law firm Freshfields Bruckhaus Deringer in October 2019. He was found by the SDT to have breached SRA Principles 2 “integrity” and 6 “maintaining public trust in the profession” as a result of a sexual encounter with a junior colleague in 2016 outside working hours, and was fined £35,000.
Beckwith appealed to the High Court, which found in his favour.
The High Court held that the tribunal had been wrong to find that Beckwith had failed to act with professional integrity. The sexual activity was deemed consensual and he had not exploited his professional status to take unfair advantage of her. The SDT’s conclusion that Beckwith undermined public trust was also ‘flawed, and cannot stand’, the High Court ruled.
Beckwith’s actions affected his own reputation, the judgment stated, ‘but there is a qualitative distinction between conduct of that order and conduct that affects either his own reputation as a provider of legal services or the reputation of his profession.’
As well as the misconduct verdict, the £200,000 costs order was also overturned.
The ruling provides clarity on the extent to which the SRA as a professional regulatory body has authority to ‘reach’ into the private lives of those it regulates. Indeed, the decision may have implications for other regulated sectors and their scope of authority. The FCA, for example, has made clear that non-financial misconduct, as well as financial misconduct, are relevant to its assessment of fitness and propriety of regulated people in the financial services sector. However, the Beckwith decision may precipitate challenges from individuals in financial services who argue that findings of lack of fitness and propriety should be more closely aligned to the rules and to challenge findings in relation to personal conduct which falls outside that category.
Summary termination following employee’s repudiatory breaches
Palmeri v. Charles Stanley & Co
In Palmeri v Charles Stanley & Co, the High Court considered the impact of the employee’s unacceptable conduct on their breach of contract claim.
The claimant, Mr Palmeri, was a self-employed stockbroker who provided services for 20 years to Charles Stanley & Co Ltd, an investment and management firm on the London Stock Exchange.
The arrangement between Mr Palmeri (and other self-employed investment managers) and Charles Stanley & Co was that Mr Palmeri earned revenues with the company, who then took a contractual amount out of his revenue in exchange for use of the company’s office space, support services and of regulatory approvals.
Mr Palmeri’s contract contained a three-month notice period but no payment in lieu of notice (PILON) provision.
In 2014 the company sought to recoup a larger proportion of the revenues earned by self-employed investment managers by changing its operating model. The company pursued a lengthy change process to move affected investment managers onto the new terms or letting them go on notice. It was not disputed that Charles Stanley was entitled to initiate this change programme.
Senior management decided it was time Mr Palmeri made his decision and it was decided that he would be invited to a meeting where he must either sign up to the new terms or leave immediately with pay in lieu of notice. On 21 April 2017 Mr Palmeri was called to an unscheduled meeting in which he was given the ultimatum.
Mr Palmeri quickly lost his temper and immediately claimed he was being ambushed. He disparaged the company and its management using strong language. He was told his behaviour was inappropriate.
There was then a meeting between Mr Palmeri and his team after which he returned to the meeting and said he would sign under protest. However, his abusive rhetoric escalated, referring to members of senior management by name, including the CEO and other Board members, in offensive expletive-laden terms.
Mr Palmeri’s contract was summarily terminated. He was told he would be paid for three months in exactly the same way as if he were still engaged by Charles Stanley.
He and his team were escorted from the premises.
Mr Palmeri then brought breach of contract proceedings against the company, arguing that they did not have a contractual right to propose to make a payment in lieu of notice.
Mr Palmeri accepted that his conduct was unacceptable but sought to contexualise it as the norm within the finance world. He also argued that he was of big character with a high and expressive emotional trigger and that the company has sought to exploit his volatility by ambushing him with a meeting and ultimatum that would provoke him to react in an unacceptable way.
The High Court took this context into account, but held that Mr Palmeri’s conduct was nevertheless a serious breach. His attack on the competence and integrity of the company’s management was incompatible with the mutual relationship of trust and confidence. Therefore, the High Court held that the company was entitled to summarily terminate Mr Palmeri’s contract.
After the dismissal, the company’s compliance department began an investigation into Mr Palmeri.
The judge found that the evidence disclosed a sustained and significant pattern of unreported potential conflicts of interest, a serious breach of complaint handling procedure and evidence of unauthorised credit broking individually and collectively engaging contractual rights to summary dismissal.
The fact that Charles Stanley had been poised in any event to deny the notice period did not affect its entitlement to rely on the conduct that ensued or was later discovered as giving it a right to summary dismissal that it would not otherwise have had.
The High Court also held that the company’s own intention to deprive Mr Palmeri of his contractual notice period when giving Mr Palmeri the ultimatum did not affect the company’s entitlement to rely on his conduct as a repudiatory breach of contract. Therefore, Mr Palmeri’s claim failed. Mr Palmeri lost his breach of contract claim on the basis of his own repudiatory breaches.
Although this case involved a self-employed contractor and not an employee, it applied principles that are also relevant to employment relationships.
This means that employers will not lose the right to terminate employment contracts without notice if an employee’s conduct is considered a repudiatory breach, even where the employer themselves are in breach of contract or intending to breach the contract, or where they have different motives or reasons for wanting to terminate employment.
Whistleblowing & statutory definition of protected disclosure
Simpson v. Cantor Fitzgerald Europe
In Simpson v Cantor Fitzgerald Europe, the Court of Appeal affirmed the decision of the tribunal to reject a whistleblowing claim based on 37 separate alleged disclosures.
Although separate communications can, when taken together, amount to a protected disclosure, this did not apply to the facts of this case.
Mr Simpson, the claimant, worked for Cantor Fitzgerald , an investment bank, as Managing Director on its Emerging Markets desk.
He made numerous allegations regarding their trading practices.
His employer considered his actions as resulting from a failure to generate business. In view of behaviour described as “distrustful and obstructive”, he was suspended and later dismissed for being “utterly impossible” to work with.
The claimant brought claims for automatic unfair dismissal for having made protected disclosures.
At first instance, the tribunal found that none of the alleged disclosures met the statutory definition of a ‘protected disclosure’ and that the claimant’s motivation to raise these matters related to commission payments.
Mr Simpson appealed on the basis that the tribunal should have aggregated each of the individual disclosures and considered them cumulatively.
The EAT dismissed the appeal, a decision which the Court of Appeal then affirmed.
While two separate communications together may amount to a protected disclosure (Norbrook Laboratories v Shaw), this depends on the facts. In this cases, none of the communications amounted to a protected disclosure taken alone or by reference to any previous communication.
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Last updated: 28 December 2020
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals