Recently, CM Murray ran its first virtual internship programme. As part of the programme, we asked the interns, Kelys Malouda, Eleanor Connolly and Abigail Blanche, to summarise three recent cases heard by the UK’s Courts and Tribunals, which considered employment status, the knowledge test for inducing breach of post-termination restrictive covenants, and the territorial scope of UK employment and discrimination law. Their summaries, prepared with assistance from three of our associates, were so good that we thought we’d share them below.
1. Varnish v British Cycling Federation (t/a British Cycling)
The EAT dismissed an appeal against an employment tribunal’s finding that a professional cyclist was not an employee or a worker under the Employment Rights Act 1996.
Ms Varnish, a professional cyclist, had entered into various athlete agreements with British Cycling. Following the termination of her relationship with British Cycling for performance-related reasons, Ms Varnish lodged proceedings in the employment tribunal (“ET”) for claims including unfair dismissal and discrimination.
The ET held that Ms Varnish was not an employee, on the basis that the irreducible minimum for an employment contract had not been met: whilst the cyclist was found to be subject to control under the athlete agreement, neither mutuality of obligation nor personal performance could be established. The ET also held that Ms Varnish was not a ‘worker’, having found that she was not undertaking to do or perform personally any services for British Cycling.
Employment Appeal Tribunal (“EAT”) Decision
Ms Varnish appealed to the EAT on the following three grounds, all of which were subsequently dismissed:
i. The ET had erred in law in finding that there was no mutuality of obligation. The EAT found that the ET had correctly applied a refined version of the well-known Ready Mixed Concrete test.
ii. The ET had erred in concluding that the cyclist was not a worker. The EAT confirmed that mutuality of obligation must at least apply to limb (b) workers in the sense of the minimum required to give rise to a contract. The EAT further confirmed that the finding that Ms Varnish was not party to a contract in which she undertook to do or perform personally any work or services was correct.
iii. The tribunal’s reasoning was irrational. The EAT disagreed, and held that the issues raised by Ms Varnish in this context were only minor factors in the ET’s evaluative judgment.
This decision does not alter the law in any way, and, notably, the EAT emphasised that the conclusions reached in this case were based on very particular facts. This ruling may therefore be of limited application in future cases that are based on an entirely different factual matrix. Nevertheless, this case provides a useful reminder, for employees, employers and their advisers, in relation to the limited circumstances in which the EAT can interfere with an ET judgment.
2. Allen v Dodd & Co Limited
The Court of Appeal considered what amounts to a sufficient state of mind to make a person or entity liable in tort for inducing a breach of contract.
Mr Pollock, an accountant, joined Dodd & Co from its competitor David Allen. Before Mr Pollock started work, Dodd & Co sought advice on the restrictive covenants in Mr Pollock’s service agreement with David Allen. The legal advice concluded that the restrictive covenants were, more likely than not, unenforceable.
In the High Court, the judge found that the scope of the restrictive covenants was too broad, but that when appropriately modified Mr Pollock had breached them. However, the judge also found that Dodd & Co was not liable in tort for inducing Mr Pollock to breach the restrictive covenants. David Allen appealed.
The Court of Appeal considered whether Dodd & Co had sufficient knowledge to be liable in tort for inducing a breach of contract. The Court held that it did not on the basis of two important factors:
i. Dodd & Co undertook an early investigation of Mr Pollock’s contractual agreement with David Allen – it did not turn a blind eye to the matter; and
ii. The legal advice received from its solicitors was that the restrictive covenants were more likely than not unenforceable.
In reaching its conclusion, the Court held that the test, properly interpreted, was that in order to be liable for the tort of inducing a breach of contract, “you must know that you are inducing a breach of contract”. It added that “‘Are’ is not the same as ‘might be”. The Court affirmed that acting on the basis of legal advice that a term is “more likely than not” unenforceable is not sufficient for liability.
However, the Court left open the possibility that more finely balanced advice might be sufficient – for example, advice going no further than to say that it is arguable that no breach will be committed.
While actions against rival firms to indirectly enforce covenants are uncommon, employers should be aware of this risk and assure themselves that the covenants are unenforceable before proceeding. Individuals looking to join competitors should also take advice on whether the covenants are enforceable.
3. Hamam v British Embassy
The EAT upheld an ET decision that reaffirmed the current understanding of the territorial scope of UK employment and discrimination law and the application of the “sufficient connection” test. An individual residing overseas and working in a British enclave is of itself unlikely to be sufficient to establish entitlement to UK employment law rights.
Ms Hamam worked as Vice Consul for the British Embassy in Cairo, Egypt. Upon termination of employment Ms Hamam sought to bring claims for racial discrimination, victimisation, unfair dismissal and whistleblowing detriment in a UK ET.
Applying the “sufficient connection” test, the ET noted that Ms Hamam was an Egyptian national and resided in Egypt; she had also been recruited in Egypt and her work was permanently and predominantly in Cairo. Additionally, she was paid in Egyptian currency, paid taxes in Egypt (not the UK), and her redundancy payment and holidays had been calculated in line with Egyptian law and her contract was, by implication, governed by Egyptian law. Further, the ET noted that her line management was handled locally, and she was not eligible for the UK Civil Service pension scheme. These factors collectively led the ET to conclude that Ms Hamam’s employment could not be sufficiently connected to the UK, meaning the Tribunal did not have jurisdiction to hear her claims.
Ms Hamam appealed to the EAT, arguing that ET had not put enough weight on the fact that the embassy was a “British enclave”. The EAT dismissed the appeal. It was held that an employee who works in a “British enclave” is not necessarily within the jurisdiction of UK employment or discrimination law. Further, there had been no previous case where a locally engaged individual succeeded in demonstrating that they fell within the territorial scope.
The case demonstrates the fact-specific nature of analysis required when determining the territorial scope of UK employment and discrimination law. It also reaffirms the position that working in a “British enclave” does not bestow automatic entitlement to protection British employment rights. It is important to remember that employees who are locally engaged will likely be protected by the legislation of the applicable country in which they are employed. Where there is an international element to an individual’s employment it is always advisable to seek expert advice.
We have a particular reputation advising multi-national employers and employees on a wide range of issues, including allegations of wrongdoing, whistle-blowing, harassment and discrimination claims, restrictive covenant issues, and bonus and wrongful dismissal claims, frequently with a cross-border element. If you would like to discuss any issues you may be facing, or for guidance on your specific rights, responsibilities and potential liabilities, please contact Partner Beth Hale and Associates Sophie Rothwell, David Jones and Pooja Dasgupta, all of whom specialise in advising and representing multi-national employers and employees.