Trainers who planned to set up rival company were unfairly dismissed

30 Oct 2017 By PM Editorial

But judge awards them nothing as pair would have been fired even if process had been followed correctly

Two trainers who set up a rival firm and contacted potential clients while they were still employed were unfairly dismissed, a tribunal has ruled.

Nottingham Employment Tribunal heard that Mrs Taylor was employed as a director of Excell for Training, a company providing training and assessment for apprenticeships. She was also a 5 per cent shareholder. Meanwhile, Miss Starrs was employed by the company in a management role.

Both Taylor and Starrs’ employment contracts contained a clause stating that they must not “directly or indirectly engage in or have any interest financially or otherwise in any other business enterprise [that] interferes or is likely to interfere with [their] independent exercise of judgement in Excell for Training’s best interest”.

In 2015, the company suffered cash flow problems, caused by an IT issue that affected the industry at large and ultimately meant the company could not be paid for the services it provided to learners. Because of this, Mr Boyd, the company’s other director, tried to extend the business’s overdraft facility in August 2015. He was told he would need to get a personal guarantee for the loan from both directors, but Taylor declined to provide this.

As a result, Boyd asked Taylor to stand down as a director of the company, which she did. She remained an employee and her job title continued to be ‘director’.

In October 2015, Taylor’s pay was reduced following a round of contractual negotiations. She began to think about leaving the business and spoke with Starrs about setting up their own training business, with the help of an investment from Starrs’ partner, Mr Shutler. By late October, the trio had incorporated Arrow Training, with themselves as directors and shareholders. The tribunal also found that, at some point while she was still employed by Excell, Taylor took part in meetings with one of the company’s key clients in a bid to get them to divert their business to Arrow.

As plans for the new business progressed, the three approached Mr Linley, Excell’s finance manager, to see if he was interested in joining them. Linley was invited to a meeting at Taylor’s house to discuss the venture and was asked to bring some rough figures of business costs to help develop a business plan.

Although Linley attended the meeting and produced figures, he later decided he was not willing to go ahead with the plan unless he got at least a 10 per cent shareholding in Arrow. He raised the issue with Shutler, who was unwilling to offer him the shareholding.

In November, Linley told Boyd of the plan. Both Taylor and Starrs were on annual leave at the time but were suspended when they returned on 16 November. Boyd also then called some of his business’s clients to explain what had happened and the tribunal felt that, based on his choice of words at this point along with his words in the subsequent meetings, he believed the allegations against his staff were well-founded and that they should be dismissed.

Boyd held an investigatory and disciplinary hearing with the pair on 17 November where he decided they should both be summarily dismissed. Both appealed, but the decision to dismiss was upheld.

Allowing the claims for unfair dismissal, the tribunal found that the decision to dismiss was not based on a reasonable investigation, as Boyd had already made up his mind to fire the pair by the time he held the investigatory hearings.

However, Judge Dyal decided to reduce their compensatory awards to nothing because, even if the investigatory procedure had been followed fairly, it was clear that the pair still would have been dismissed.

Taylor also brought claims for holiday and notice pay, but these were withdrawn.

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