Employer Breach of Employment Contract May Release Employee from Post-termination Restrictions
In our latest article we look at the recent decision of the High Court of England and Wales in Brown & Anor v Neon Management Services Ltd & Anor where the effect of an employer's fundamental breach on post-termination restrictions was considered.

 

In the recent English High Court case of Brown and others v Neon Management Services Ltd and another [2018] EWHC 2137, Mr Brown, Ms Bhoma, and Ms O'Reilly (the "Claimants"), senior employees at Neon Management Services Ltd ("Neon") successfully sought damages and declarations that they were wrongfully dismissed and therefore not bound by the post-termination restrictions (“PTRs”) in their employment contracts. 

Background to the Case

The Claimants worked in the insurance/underwriting industry. Neon approached the Claimants in October 2014. Terms, including bonus arrangements were agreed. The Claimants began working for Neon in 2015.

The Claimants resigned on notice after Neon failed to pay salary increases and discretionary bonuses due, made salary increases and bonuses conditional upon acceptance of new less-favourable contractual terms, and removed profit commission agreed at the time of their recruitment. The Claimants contended that those breaches individually and cumulatively amounted to a repudiatory breach of contract entitling them to resign. 

The first two Claimants contended that during their notice period Neon committed further repudiatory breaches of contract and that they accepted that repudiation by resigning with immediate effect on 1 May 2018. The alleged further breaches included taking disciplinary action against the Claimants for misconduct (which the High Court found to be unjustified), alleging loss of trust and confidence in the Claimants (without allowing the Claimants to respond to such allegations) and reporting the Claimants to the regulator.

Neon accused the Claimants of misconduct for forwarding on business emails to personal email accounts amongst other infractions. 

High Court Decision 

The High Court concluded that where a notice period is for a substantial amount of time, giving and working notice will amount to an affirmation of the contract. The High Court went on to find that Neon's conduct during the notice period amounted to repudiatory breaches of contract that entitled the first two Claimants to resign with immediate effect. The High Court found further that the first two Claimants had been wrongfully dismissed as a result of Neon's unsubstantiated findings of wrongdoing against them, without any investigation. The High Court declared that the first two Claimants were no longer bound by the PTRs contained in their contracts of employment.

While this is a decision of the UK High Court and so does not apply in this jurisdiction, it is likely to be persuasive in any similar dispute brought before the Irish courts. The decision in Neon is important from both the employer and employee perspective. For employees who claim repudiatory breach by their employer, going on to serve a long notice period may be seen as an acknowledgement that the employment contract continues to apply. For employers, employer conduct during the notice period may affect PTR enforceability. 

Contributed by Lisa Shannon and Alicia Compton


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Key Contacts

Alicia Compton Partner

Naoise Harnett Partner

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