Financial advisor was unfairly dismissed after being ‘blackmailed’ to sign restrictive covenant

Tribunal rules firm exerted undue pressure and left employee in tears after he hinted he would join competitor

A financial advisor has won a claim for unfair dismissal after his employer made false allegations to pressurise him into accepting an extended restrictive covenant agreement and attempted to stop him joining a potential competitor, an employment tribunal (ET) has ruled. 

The Nottingham ET ruled Peter Ward was constructively and unfairly dismissed by Fiducia Comprehensive Financial Planning after he claimed one of its directors “blackmailed” him, or threatened to do so, unless he signed an agreement lengthening his post-termination restrictive covenants. 

Ward, who worked for the financial planning provider from January 2009 until his resignation in June 2018, told the tribunal that Fiducia had applied excessive pressure on him to sign the restrive covenant agreement and discouraged him from seeking legal advice on its terms. 

The tribunal heard that on 21 May 2018 Ward gave three months’ notice to leave the business. In his letter, he thanked the directors for the opportunities presented during his time working for the firm, but said he wanted to spend more time with his family and look after his own wellbeing. 

The directors, who the tribunal heard had “always regarded him as a valuable employee”, asked him to reconsider, and Ward said he would think about it. Having done so, he declined to change his mind.

A couple of days later, Ward reaffirmed his decision to leave and met with Marcus Grimshaw, one of Fiducia’s directors, though not his direct line manager. Grimshaw wanted to know where Ward was going to work after he left and what he planned to do. The tribunal heard this was because he was “naturally concerned about protecting the future of the business”. 

Ward indicated he planned to work with a former Fiducia colleague, Ms Catlin, and Grimshaw was concerned Ward might take potential business away. 

The tribunal heard the discussion became increasingly hostile on Grimshaw’s part, and he told Ward that if he took up employment with a competitor he would treat him the way he had treated Catlin. The tribunal heard it was well known within the company that Grimshaw had been “less than pleasant” to Catlin after she decided to leave, and there were rumours he arranged for a strongly worded letter to be sent to her home address on the day she was due to get married threatening legal action against her. 

Ward felt “intimidated and harassed” by Grimshaw’s behaviour and said on two occasions he felt the need to end the meeting. But Grimshaw continued to “forcefully express his views as to what would happen if [Ward] joined Ms Catlin”. 

Ward told the tribunal he was so shaken that he broke down in tears and rang a fellow director, Anthony Scott, to explain what happened. Scott told Ward that he should go through him rather than Grimshaw in future. 

Shortly after this, Ward received a telephone call from an employee of a private company called Openwork, which provided compliance services to Fiducia, regarding a possible regulatory compliance breach. 

On 29 May, Ward was invited to a meeting at Scott’s house. Scott wanted to know what Ward planned to do and whether he wished to remain a financial advisor. There was a discussion about a recent suspected breach of financial regulations, and Scott suggested Ward take a sabbatical instead of leaving if work pressures were too great. 

There was a further meeting between Ward and Scott the next day, and the tribunal heard Scott was “aggressive” and made allegations that “serious misconduct” on the part of Ward had been discovered by Fiducia and Openwork. This included allegations that Ward had used his company email for personal purposes, sent documents from work to his personal mail address, failed to advise Fiducia that he had inherited a large sum of money from a client of the business, and that he had presented himself as a solicitor when he was not. 

On 4 June, Ward was sent a draft agreement that would extend the existing restrictive covenants already in place from 12 months to 24 months after his employment was terminated. The tribunal heard Fiducia “threatened” the use of clawbacks in respect of commission that had already been earned by Ward if he did not sign. Ward felt “very pressurised” but refused to sign. 

The tribunal heard Ward then submitted his second resignation on 7 June and left his employment immediately.

In his ruling, employment judge Ahmed said he was satisfied that the meeting on 25 May constituted bullying and intimidating behaviour by Grimshaw, and that Fiducia made “false and spurious allegations” against Ward to pressure him into either accepting the terms of the extended restrictive covenant or deter him from joining a potential competitor. 

“While the term ‘blackmail’ may be somewhat emotive, there is no doubt that [Fiducia] made it clear to [Ward] that if he refused to sign the new draft agreement they would pursue allegations of gross misconduct against him which would undoubtedly tarnish his professional reputation,” Ahmed said.

He added he was satisfied the allegations of misconduct were “wholly disingenuous” because they would have been reported to the Financial Conduct Authority (FCA) if there was any substance to them. The tribunal said there was no evidence of the allegations ever being reported. 

Sarah Armstrong, a dispute resolution partner at Gunnercooke who specialises in the enforcement of restrictive covenants, told People Management the case was a “salutary” lesson on restrictive covenants. She said that while it would have been highly unlikely that the proposed 24-month covenant would have been enforceable, she said the existing 12-month one may well have been. 

“Post-termination restrictive covenants are only enforceable to the extent that they go no further than is reasonably necessary to protect the legitimate business interests of the employer,” Armstrong said. “It is only in exceptional circumstances that 24-month covenants would be upheld by the court.”

The ET ordered Fiducia to pay Ward £17,199.12 in compensation. 

Fiducia could not be reached for comment, and Ward declined to comment for this article.