Business Protection and TheHostile Employee...                 Gareth Kervin & Anne Mannix                               2...
Kervin & Barnes   Our lawyers have City backgrounds (Simmons and    Simmons, DLA, Deutsche Bank and BGC Partners/Cantor  ...
Employees: Assets v Risk to the business   “Exceeds Expectations”       Poor performance   Reflects Key Values        ...
Poor Performance: Employment Contract   Accurate list of duties/role description (non-contractual?)   Satisfactory perfo...
Poor Performance: Employment Policies   Development plans: (PMPs, PIPs)   Appraise managers on their ability to carry ou...
Misconduct: Employment Contract/Handbook   non-contractual disciplinary policy   contractual email/phone/internet use po...
Incentives & Sanctions (performance & conduct)   Remuneration schemes consist of fixed and variable pay with    deferred ...
Incentives and Sanctions - Exclusions   Exclusion clauses     Exclude bonus on termination: valid to provide that employ...
Incentives and Sanctions – pay in lieu of notice   PILON     Contractually agree what payments are included: limit to ba...
Incentives and Sanctions: Atypical post-termination restrictions?   Repayment, non-vesting & forfeiture provisions: are t...
Competition: Employment Contract provisions   Requirement to notify of job offers   Requirement to provide copy of contr...
Competition: Post-termination Restrictions   Prima facie unenforceable   Legitimate business interests – workforce, trad...
Compromise Agreement?   Use where restrictions in the employment contract are    insufficient   If there has been a fund...
Compromise Agreement: Other protection clausesin Compromise Agreement   Employee warranties       No fundamental (or mat...
Enterprise and Regulatory Reform bill andpossible impact   Consultation re changes to unfair dismissal legislation   Cod...
Remedies   Take immediate legal advice   Damages in covenant claims and account of profits   If damages are not an adeq...
Thank youContact us: Gareth Kervin   gkervin@kervinandbarnes.com   Anne Mannix    amannix@kervinandbarnes.com           ...
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Business protection seminar

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How to reduce the risks posed by hostile or disloyal employees, including payment adjustments and enforcement of post-termination restraints

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  • Express obligation to report own wrong-doing? (no implied term for ordinary employees)CCTV/ recorded phone lines/ monitoring emails (employees should be told - policies)
  • Contractual provisions for pay adjustments:Clawbacks (repayment & forfeiture of non-vested elements)Bonus/ Deferred Remuneration (good leaver, bad leaver provisions)Exclusion ClausesPILON clause –allows for early termination with no breach by employer
  • Repayment clause if employee breaches (avoid penalty clause)
  • Freezing orders (needs underlying cause of action and good arguable case)Libel or defamation issues (for derogatory statements)
  • Business protection seminar

    1. 1. Business Protection and TheHostile Employee... Gareth Kervin & Anne Mannix 24 October 2012 © Kervin & Barnes Solicitors | 020 3178 5360
    2. 2. Kervin & Barnes Our lawyers have City backgrounds (Simmons and Simmons, DLA, Deutsche Bank and BGC Partners/Cantor Fitzgerald) Listed in both Legal 500 and Chambers and Partners, two of the legal profession’s most prestigious directories Clients include traditional City employers as well as household names such as ebookers, Danone and P&O © Kervin & Barnes Solicitors | 020 3178 5360
    3. 3. Employees: Assets v Risk to the business “Exceeds Expectations”  Poor performance Reflects Key Values  Misconduct Loyalty  Competition Pre-emptive drafting © Kervin & Barnes Solicitors | 020 3178 5360
    4. 4. Poor Performance: Employment Contract Accurate list of duties/role description (non-contractual?) Satisfactory performance clause? Probationary period (include option for employer to extend) Reserve right to change duties during notice/garden leave © Kervin & Barnes Solicitors | 020 3178 5360
    5. 5. Poor Performance: Employment Policies Development plans: (PMPs, PIPs) Appraise managers on their ability to carry out appraisals/PMPs Specific capability procedures (see Acas Code) Avoid policies with unnecessary administrative burden © Kervin & Barnes Solicitors | 020 3178 5360
    6. 6. Misconduct: Employment Contract/Handbook non-contractual disciplinary policy contractual email/phone/internet use policy Express obligation to report own wrong-doing? Social networking and social media clauses: limit comments on company, use of work email address, contacts- who do they belong to? Gross misconduct: give relevant examples, but not exhaustive list Surveillance –has employer reserved the right? CCTV/ recorded phone lines/ monitoring emails Return of all Company property © Kervin & Barnes Solicitors | 020 3178 5360
    7. 7. Incentives & Sanctions (performance & conduct) Remuneration schemes consist of fixed and variable pay with deferred elements FSA Remuneration Code: effective risk management, reduce excessive rewards for failure Contractual provisions for pay adjustments:  Clawbacks  Bonus/ Deferred Remuneration  Exclusion Clauses  PILON clause © Kervin & Barnes Solicitors | 020 3178 5360
    8. 8. Incentives and Sanctions - Exclusions Exclusion clauses  Exclude bonus on termination: valid to provide that employee must be employed and not under notice (Locke v Candy & Candy Ltd [2010] CA  Micklefield clause: generally excludes companys contractual liability for loss of employees rights under share plan caused by any termination of employment (Micklefield v SAC Technology Ltd [1991]) Exclude claims arising from employer’s exercise of discretion: clear well drafted ones are enforceable © Kervin & Barnes Solicitors | 020 3178 5360
    9. 9. Incentives and Sanctions – pay in lieu of notice PILON  Contractually agree what payments are included: limit to basic salary for notice period (or salary plus benefits)  include repayment if employee has committed a prior (fundamental) breach  Beware: Cavenagh v William Evans Ltd [2012] CA © Kervin & Barnes Solicitors | 020 3178 5360
    10. 10. Incentives and Sanctions: Atypical post-termination restrictions? Repayment, non-vesting & forfeiture provisions: are they atypical post-termination restrictions through the back door?  Mallone v BPB Industries Limited [2002] CA leaver should not lose vested options unless gross misconduct Foreign jurisdiction issues  Rome I Art. 21 will not oust English determination of unenforceability under restraint of trade doctrine  Duarte v Black and Decker [2007] (QB) © Kervin & Barnes Solicitors | 020 3178 5360
    11. 11. Competition: Employment Contract provisions Requirement to notify of job offers Requirement to provide copy of contract to potential new employer Appropriate period of notice whether from employee or employer Garden leave clause Appropriate post-termination restrictions Pat Systems v Neilly [2012]  High Court enforceability of restrictions assessed as at date they were entered into FW Farnsworth Ltd v Lacy & Others [2012]  High Court held employee bound by restrictive covenants in new unsigned contract IP protection/database rights © Kervin & Barnes Solicitors | 020 3178 5360
    12. 12. Competition: Post-termination Restrictions Prima facie unenforceable Legitimate business interests – workforce, trade connections, confidential information Non-solicitation, non-dealing, non-compete clauses Restrictions in share option schemes, LTIPS Email contacts at work mingled personal and work contacts: – who owns the contacts? Hays Specialist Recruitment v Ions [2008] High Court pre-action disclosure against ex-employee © Kervin & Barnes Solicitors | 020 3178 5360
    13. 13. Compromise Agreement? Use where restrictions in the employment contract are insufficient If there has been a fundamental breach by employer Consider fresh, express restrictions in the settlement agreement  additional and separate consideration  consideration is taxable (s 225 ITEPA 2003)  sign as a deed WARNING: entire agreement clauses © Kervin & Barnes Solicitors | 020 3178 5360
    14. 14. Compromise Agreement: Other protection clausesin Compromise Agreement Employee warranties  No fundamental (or material) breach of contract by employee  Employee has returned all property/confidential information  No derogatory statements  Confidentiality as to terms  No offer or expectation of offer of income Repayment clause if employee breaches Social networking and social media- agree to restrict employee’s comments about employer & agree who owns contacts © Kervin & Barnes Solicitors | 020 3178 5360
    15. 15. Enterprise and Regulatory Reform bill andpossible impact Consultation re changes to unfair dismissal legislation Code of principles, model settlement and draft letters Option of early termination without procedures where no dispute (currently not “without prejudice”) Employee would not be obliged to accept any offer Consider termination in context of existing Good Leaver/ Bad Leaver provisions © Kervin & Barnes Solicitors | 020 3178 5360
    16. 16. Remedies Take immediate legal advice Damages in covenant claims and account of profits If damages are not an adequate remedy:  Interim injunctions to enforce express terms  Springboard injunctions  Delivery up  Freezing orders  Search orders – pre-issue of claim  Permanent injunctions Libel or defamation issues Employer may have damages claim for breach of fiduciary duty © Kervin & Barnes Solicitors | 020 3178 5360
    17. 17. Thank youContact us: Gareth Kervin gkervin@kervinandbarnes.com Anne Mannix amannix@kervinandbarnes.com © Kervin & Barnes Solicitors | 020 3178 5360

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