When TV content acquirer/distributor RDF bought production company IWC, it got IWC chair and creative director Alan Clements to agree a 3 year non compete. 16 months later, Clements resigned to join competitor SMG. RDF sued but Clements argued he was not bound. How come and who won? Naomi Flynn and Jenny Wotherspoon report.
Who: RDF Media Group PLC and RDF Media Limited v Alan Clements
When: 5 December 2007
Where: High Court of Justice
Law stated as at: 2 January 2008
Alan Clements ("AC") (the husband of TV presenter Kirsty Wark) was employed by IWC Media Limited ("IWC") as Creative Director. IWC was acquired by RDF in December 2005.
AC signed a share purchase agreement ("SPA") which stated that he would not work for a competitor of RDF for three years from the date of the sale (although this would be reduced to two years if AC was unlawfully dismissed by RDF).
AC agreed to work for RDF and entered into an employment contract which prevented him from competing with RDF for 6 months after termination of his employment.
On 30 March 2007, AC resigned to take up a new post with Scottish Media Group ("SMG"). The Court accepted that AC had forgotten about the restrictions in the SPA. RDF sought to hold AC to the terms of the SPA and asked the Court for an injunction.
AC alleged that RDF had breached their implied duty of trust and confidence to AC as an employee and that this amounted to constructive dismissal. If his argument was successful it would mean RDF would be in breach of contract and unable to rely on the post termination restrictions in his contract of employment. In addition the SPA restrictions would be reduced in length to two years duration from the date of the sale.
The duty of trust and confidence is implied into all contracts of employment and provides that an employer must not, without reasonable or proper cause, conduct itself in a manner which is calculated or likely to destroy or seriously damage the employment relationship.
AC alleged that RDF had breached his contract by making vitriolic statements about him in the press and by making defamatory comments about him at board discussions.
The Court dismissed AC's allegation in relation to the internal board discussions at RDF. The Court found that a board of directors is entitled to discuss an employee in a negative manner without breaching trust and confidence, as this merely represents the company thinking aloud and the duty of trust and confidence does not go as far as to control thoughts.
However, in relation to the press briefing the Court found that the statements made constituted a serious attack on AC's character and, whether or not that was true, this action constituted conduct which was not reasonable or proper and which, therefore, amounted to a breach of the implied term of trust and confidence.
However, interestingly, the Court found that before the press briefing had taken place, AC had acted in breach of his contract of employment by disclosing confidential information belonging to RDF to his new employer. Therefore, it would be inequitable to allow AC to claim that RDF caused serious damage to his employment relationship when this relationship was already damaged by his own conduct.
On this basis, the Court held that the restrictions in the SPA were valid and would remain so for 3 years.
Why this matters:
This has been a high profile decision (quite apart from the media personalities involved) and it gives the following helpful guidance:
- Employees will have a good argument that their employer has breach of trust and confidence where the employer engages in a campaign of vilification against them in the press. However, in some circumstances an employer may have grounds for briefing the press where this is necessary to correct a misstatement providing that this does not go wider than necessary.
- Directors are entitled to discuss employees in a negative manner without breaching trust and confidence. Nonetheless, prudent employers should avoid such discussions as far as possible to avoid potential inferences of discrimination, damage to credibility and embarrassing questions at Court!
- This case appears to create a new defence for employers when faced with a claim for constructive dismissal by an employee who has already breach of their contract of employment fundamentally. However, employers should be aware that the Court has granted a right to appeal on this point, so watch this space……….