BHL Assessment

Advise Bob of his contractual obligations to WAY Ltd. In particular, assess and evaluate his common law duties in comparison to contractual obligations as an employee and the potential outcome of breach. A contract of employment may be written or verbal and there is not a lawful duty for an employer to supply the employee with a written contract. However under the Employment Rights Act 1 996 Section 1 (1) a written statement of particulars is required and under Section 1(2) this may be given in installments but not any longer than two months after the employment has started.
Contracts contain terms’ which can either be expressed or implied and it is important for employers to think carefully when creating a contract as it may need to be relied upon in the future should any dispute or ambiguity arise. Daniels (201 2 page 35) defines expressed terms as “terms that have been discussed and agreed between the employer and employee” “they may not be in writing and they cannot diminish statutory rights”. She defines implied terms as “those that have not been specifically agreed between the employer and employee but are derived from collective agreement, statute, custom and practice and the courts”.
Examples of what is considered express terms include the amount of sick, holiday and redundancy pay and the amount of wages or hours expected to be worked. Implied terms are different in that they will be the same for most contracts of employment no matter what the activity is including duties owed to the employee by the employer and vice versa such as the duty to pay etc. Bob should be aware that under common law there are certain duties owed by him as an employee to his employer WAY Ltd.

Emir (2012 page 307) states “Since the relationship between employer and employee is one of trust ND confidence the law implies into the contract of employment the term that every employee should serve his employer faithfully’. In regards to all of the clauses and what Bob is currently doing which is working for a competitor in his spare time he is already breaching one of the first common law duties which is the duty of faithful service, Emir (2012 page 308) states that “It is a breach of the employee’s duty of faithful service to compete with the employer while he is still employed”.
The cases of Adamson v B & L Cleaning Services Ltd (1995) and Ward Evans Financial Services Ltd v Fox (2001 ) are examples of not only a breach of faithful service but also of fidelity which will be discussed further on. Clause one instructs Bob that he is not to devote any time that should be spent in work on any other business or ‘charitable endeavourer unless he has written consent by the company.
This clause set out by WAY Ltd is not reasonable in the way it is worded, as in some cases Bob has a duty to devote his time that should be spent in work to other affairs if it is necessary. One example of this would be jury duty which anyone meeting the specific criteria is obliged to take part in unless there are specific and exceptional resistances, and to enforce that Bob must have it in writing before he is to attend such activities is not reasonable.
If it were found that this clause was unreasonable then the clause may become invalid. However if it was determined to be fair then this case would be similar to Wishes Dairies v Smith (1935) where the legal principle identified was that the duty of fidelity lasts until the employment has ended. Although Bob has not yet breached this duty, he has breached several others relating to this the first one being a duty of mutual trust and confidence.
In the case of Mali v BCC AS (in Liz) 1997) Lord Steen stated “the employer shall not without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee” (Painter and Holmes 2012 page 145). The term ‘mutual’ means ‘joint’ or both in agreement so this statement works both ways in that the employee also has an implied duty not to act in such a way that would upset or cause animosity among employer and employee. Bob has broken this duty by working for a competitor even though it may be in his spare time.
It should also be recognized that although Bob appears to be a senior engineer, if he is having to work for another company in his free time due to the business not doing as well as it has been then he must be on commission or a zero hour contract as if he was on a fixed term or full time contract his pay would remain the same no matter what hours he worked. Clause two states that during the period of his employment Bob should not partake in any other work which may affect the way in which he carries out his own work for WAY Ltd. The modern practice of ‘moonlighting’ whereby an employee undertakes spare-time work outside his employment ours can raise problems, particularly if the work is in competition with the employers business” (Emir 201 2 page 318). The case of Gray v C & P Pembroke Ltd (1972) which is similar to Bob’s situation supports this idea that working for a competitor is not deemed acceptable if it is expressed in the contract otherwise, however Frame v McKenna and Graham Ltd (1974) found that it was acceptable if it not mentioned in the contract of employment.
Cases which would suggest Bob is in breach of his common law duties if followed would be Havoc Ltd V park Royal Scientific Instruments Ltd (1946), Nearby Dean of Westminster (1999), Lewis v Underworld Garages Ltd (1986), Reading v Attorney General (1951 ) and the most recent case of Vegetarian v Churchill Group Ltd (2013). Moonlighting links with the reasoning that a fiduciary duty should exist among employers and employees.
Lord Wolf’s view on fiduciary duty is that “The employer is entitled to the single-minded loyalty of his employee. The employee must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or he benefit of a third party without the informed consent of his employer” (Broodier 2012 page 1).
However there is an argument as to how far this fiduciary relationship goes and it was recognized in the case of University of Nottingham v Tweet (1999) that ambiguous terminology may cause confusion as to the nature of the relationship between employer and employee. Although the common law duties require loyalty, good faith and honesty, to assume that an employee is to give his/her all to their employer and that the contract of employment is a fiduciary one is false. However the case of Helmet Integrated Systems Ltd v Tundra (2006) is a contrast in to the extent of fiduciary duty that is owed.
The cases of Bell v Lever Brow (1931 ) and Osborn Corp. v Reecho (1984) are cases involving a senior member of the team and it is often applied that they have a greater duty owing to the employer to disclose their own misconduct than perhaps an employee would have. In clause two however, the restriction may be considered too wide in that it restricts him from undertaking any work which may prejudicially affect his ability to carry out his work for WAY and says that again it will be at he discretion of the company.
It may be deemed UN-reasonable to consider that the company would need to be informed of every activity carried out in Bob’s spare time and that it would be up to them to make a decision about how prejudicial it is. Painter and Holmes (2012 page 151) state that “The courts are very reluctant to accept that what workers do in their spare time should be of any concern of the employer as in Nova Plastics Ltd v Forget (1982). However, sometimes they are bound to do so. This statement emphasizes that although it is in the interest of the employer to be aware of hat their employees do in their spare time, the clause restricting Bob from carrying out any activity in his spare time unless the company has agreed may be to wide and unreasonable. A duty of fidelity is owed under common law and ensures that “Employees must not carry out activities that clearly conflict with the duty that they owe to their employer” (Daniels 2012 page 44).
The obligation not to compete with an employer can be regarded as an expressed term and included as a restrictive covenant. Although he has already breached this duty by working for a competitor WAY could limit this damage further if there was a restrictive lease in the contract indicating that Bob could not set up a competing business such as the partnership he wishes to indulge himself in with Michael for a certain period of time and within a certain geographical location if it is deemed ‘reasonable’.
Bob’s case is similar to the one of Sanders v parry (1967) backed up by Coleman Dammar Ltd v Sakes (2001 however the cases of Helmet Integrated Systems Ltd v Tundra (2006), Customer Systems Pl v Ransom (2012) and Tim Russ & Co v Robertson (2011) all indicate that it can be difficult to enforce these covenants if they are not deemed reasonable or the employee can prove it was after the course of employment had ended.
Along with a restrictive covenant being inserted to non-compete, if a garden leave clause were also present then it would prevent Bob from competing with WAY by going to another business such as Michaels or prevent him from setting up his own business within a certain amount of time. This clause is often inserted as it can be unclear what the interpretation of the courts will be regarding non restrictive covenants and employers wish to protect themselves from the possibility of employees leaving to work for a competing equines and taking with them knowledge they may have gained from the company.
Garden leave was brought to the attention of the courts in the case of William Hill Organization Ltd Tucker (1998) as if the courts feel the clause is too wide or UN reasonable, it may not be imposed as Simian Ltd v Christensen (2000). Garden leave often arises after the notice of termination of employment has been given either by the employer or employee and does not always have to be expressed in the contract to be effective but it can sometimes be imposed by the courts at a later date as in Christie v Johnston Carmichael (2010) and SO and R Valuation Service co LLC v Boudoirs (2008).
The courts may also decide to modify the clause and not to render it completely inadmissible if they feel it may De-skill the workers if they have too much time off as in Provident Financial Group Pl v Hayward (1988) and GHZ Group Inc v Gallstone (1993), but in certain cases they may uphold the clause if they feel it is fair as in Euro Brokers Ltd v Rabbet (1995) and Evening Company Standard v Henderson (1987). The third clause identifies the common law clause of confidentiality and again utility in which the employee is expected to operate in such a way as not to disclose confidential information about his employer.
The fundamental case for this duty is Faced Chicken Ltd v Fowler (1985) in which the Court of Appeal recognized that there is a difference in duties owed by an employee who works for the company now and an employee who has left and gave several guidelines which indicated what information would be regarded as confidential. Bob would owe a greater duty of confidentiality to WAY at the moment as he is still operating as one of their employees compared to he situation he would be in if he left as the responsibility would be lessened but not diminished.
In the case of Rob v Green (1895) Lord Asher MR. said “l think in a contract of service the Court must imply such a stipulation as I have mentioned (ii, that the servant will act with good faith towards his master), because it is a thing which must necessarily have been in view of both parties when they entered in to the contract” (Smith and Thomas 2008 page 169). The confidentiality clause is important as is protects both the employer and employee from any unnecessary information being disclosed about either party.
If Bob were to disclose information to Michael about Highway’s pricing strategy then he would be breaching his contract terms which may give reason for a fair dismissal or if he discloses it once he has left the company whether it be to Michael or anyone else then an injunction may be granted stopping him from disclosing the information. If it can be proved that the employee or ex employee has passed on confidential information and that the business has suffered a loss as a result as in Sanders v Parry (1967) and Ansell Rubber Co v Allied Rubber Industries (1 972), then damages may be awarded to the employer.
When deciding the potential outcome of breach in this case it is important to look at both sides of the employer WAY and employee Bob. In regards to the first clause, it raises the question of whether it is fair and reasonable to be imposed as discussed in paragraph three and if it is not then the employee Bob is not bound by it and there fore would not be in breach of it.
If it is found acceptable Bob has not breached it yet as he is working for Michael in his own time and not during his working hours, however if he were to breach this clause then he may be fairly dismissed by WAY under the principles et out in Wishes Dairies v Smith and any profits made by Bob could be obtained by WAY as damages if they were to take him to court. Bob has breached clause two as he is working for a competitor of the business and it is within the same trade that he works in now.
As a result Of this breach again he may be dismissed with support of the cases of Gibson v National Union of Dyers, Bleachers and Textile Workers (1972) and Gray v C & Pembroke Ltd (1972). Clause three amounts to the highest breach of all with an almost certainty of summary dismissal if he informs Michael of his employers pricing tragedy as it is a breach of fidelity. Although clause one and two are significantly serious there may be situations where ACS may try and resolve the situation if it is in the interest of both parties and a solution may be sought after.

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