Legal

This year’s key tribunals involving senior executives

11 Sep 2020 By Clare Murray, Merrill April and George Pizzey

Clare Murray, Merrill April and George Pizzey summarise notable employment cases brought by and against top managers in 2020 and outline their implications for businesses

Benyatov v Credit Suisse (Europe) Ltd

Executives may have claims for financial losses arising out of the lawful performance of their duties. 

Summary

Mr Benyatov was convicted of crimes under Romanian law and lost his job with Credit Suisse, even though Credit Suisse agreed that Benyatov had done nothing wrong. Benyatov issued proceedings for £46m of lost earnings.

The High Court has allowed Benyatov’s claims against Credit Suisse to proceed to trial.

Practical issues

Employers should conduct adequate risk assessments for executives working overseas. 

Executives who have suffered losses arising from the conduct of their duties may have claims against their employer to recover those losses.

Rae v Wellhead Electrical Supplies Limited

Executives who resign ‘in the heat of the moment’ should be allowed a ‘cooling off period’.

Summary

Mr Rae had a disagreement with his fellow directors, which led to him shouting: “I won’t be back”, before leaving the office. Rae retracted his resignation the following day, but the directors did not accept his retraction.

The Scottish tribunal ruled that Rae’s resignation did not amount to a planned course of conduct and that he was unfairly dismissed by the board’s refusal to consider his retraction.

Practical issues

Under English law, certain circumstances may affect whether a resignation has been properly given. Employers should give executives the opportunity to confirm their position in writing. 

Executives who resign in a state of high emotion, should confirm their position in writing afterwards to avoid undermining their position.

Allen v Dodd & Co Limited

Recruiting employers may follow legal advice that restrictive covenants in the service agreement of an incoming employee’s former employer are unenforceable.

Summary

Mr Pollock, an accountant, joined Dodd & Co from its competitor David Allen. Dodd & Co had received legal advice that the restrictive covenants in Pollock’s previous service agreement were probably unenforceable, but David Allen issued claims against Dodd & Co.

The Court of Appeal held that as a general rule, people should be able to act on legal advice even if the advice turns out to be wrong. 

Practical issues

Recruiting employers and executives should take advice on the enforceability of covenants. 

Square Global Limited v Leonard

Executives defending claims by employers may rely on contractual breaches by their employer, even if they were not aware of them at the time. 

Summary

Square Global brought a claim requiring Mr Leonard, its former broker who resigned summarily, to observe his notice period and restrictive covenants. Leonard responded that Square Global was in breach of his service agreement. 

The judge observed that Leonard was correct to argue that he would have been able to rely on his employer’s breaches in defending its claim against him.

Practical issues

Executives considering a quick exit should consider whether they have the right to resign summarily.

Ferguson & Ors. v Astrea Asset Management Ltd.

Executives should not improve the terms of their service agreements before an anticipated TUPE transfer.

Summary

The four claimants were directors of an estate management company. The estate owners gave notice of termination of the management contract. Before this TUPE transfer, the claimants updated their terms to include an enhanced termination payment.

The claimants were dismissed and brought proceedings for the termination payments. The Employment Appeal Tribunal held that the pre-transfer variations were void and invalidated.

Practical issues

Employers that are TUPE transferees should evaluate recent contractual changes that create financial liabilities.

Executives should ensure that any variations to their service agreements have a proper basis.

Rihan v Ernst & Young Global Limited & Ors.

Executives who work overseas and are unable to benefit from UK statutory whistleblowing protections, may instead bring a negligence claim against their employer.

Summary

Mr Rihan was a partner of Ernst & Young in Dubai who found irregularities during an audit, which he reported and escalated within Ernst & Young. Rihan resigned and publicly disclosed his concerns. Rihan could not rely on UK statutory whistleblowing protections, so instead claimed $11m in damages for loss of earnings.

The Court held that Ernst & Young was under a duty to protect Rihan from economic loss suffered as a result of its failure to perform an audit ethically and without professional misconduct.

Practical issues

Employers should note this exception allowing executives to bring claims for economic losses.

Executives who are unable to rely on statutory protections may, in certain circumstances, bring negligence claims against their employer.

Clare Murray is managing partner, Merrill April a partner, and George Pizzey a trainee solicitor at CM Murray

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