Protecting individual clients, their wealth and their ability to provide for themselves and for their families sits at the very heart of our ‘Brabners Personal’ initiative.
Which is why, in addition to representing many of the UK’s leading employers and subject, of course, to any conflict of interest, we also represent the interests of many individual clients.
And it’s our knowledge, our expertise and our experience working with employers that gives us our USP: our insight.
Over the last 28 years I have acted for hundreds of executives. More often than not in commercially sensitive, high value claims and, in every case, one principle shines through: Take advice and take advice early! The longer we have to work with you, to develop an exit strategy, the better the likely outcome and the greater our ability to make the difference.
Many clients seek advice when the employment relationship has soured but it’s equally important, if not more so, to take advice before the employment relationship even starts. And it makes sense, at the start of the relationship, or if you are being offered a promotion, when you are most in demand, when your leverage is high, that’s when important changes to proposed terms and conditions of employment can be negotiated.
Even if there is no scope to negotiate, it’s important to review the terms of the Contract of Employment or Service Agreement before it is agreed and signed to ensure the terms don’t bind or restrict you unjustly, especially on termination. You wouldn’t buy a house without a survey and the same simple logic applies when contemplating an offer of employment.
In simple terms, employee rights fall into two categories: contractual rights and statutory rights.
When investigating an executive’s contractual rights we need to interrogate the Contract of Employment or the Service Agreement to understand what contractual rights the executive has.
Contractual clauses determine entitlements on termination to include:
- notice (or pay in lieu of notice)
- accrued holiday pay
- employer pension contributions
- company car arrangements
- permanent health insurance
- private medical cover
or, more specifically
- contractual bonus payments,
- commission payments
- entitlement to participate in / benefit from employee share schemes,
- any entitlement pursuant to any short-term incentive plans (STIPS)…
- or long-term incentive plans (LTIPS)
and, importantly, whether there is an entitlement to any (or all) of these payments upon termination of the contract.
The contractual terms may also include post termination restrictions, provisions that can materially restrict your commercial ambitions, to solicit work, clients, suppliers or staff or to act in competition with the employer’s business after your employment has come to an end. This is an important consideration on termination, as such clauses can impede future plans and a breach of such covenants can expose an executive to expensive injunction proceedings and / or claims in damages.
However, if these clauses have not been carefully drafted, if they are not sufficiently specific, too broad or unreasonable in their scope or if the employer themselves have acted in breach of the contact in their treatment of the executive such clauses can be challenged and may be unenforceable. Again, it’s important to take advice and to factor such considerations into any exit strategy.
In addition to contractual rights, we will also explore the executive’s statutory rights. The most fundamental being the right not to be unfairly dismissed. In this respect, keep in mind the fact that the burden of proof falls upon the employer. The employer has to prove a potentially fair reason for dismissal, (whether that be misconduct, capability, redundancy or some other substantial reason) and they also have to demonstrate that they have followed a fair and reasonable process before dismissing the executive. Fail to prove either, a potentially fair reason for dismissal or that the employer has followed due process and the executive may pursue a claim of unfair dismissal which, if successful, can result in an award of compensatory damages of up to 12 month’s salary or, at present, £88,519 (whichever is the lower).
We also need to consider other possible statutory claims. For example, claims of discrimination or whistleblowing claims.
Often, upon meeting a client it becomes apparent that the reason relied upon by the employer
to justify dismissal is without merit and that the real reason the executive is being dismissed,
or being treated less favourably, is by reference to what we call a ‘protected characteristic’: their age, race, sex, a disability, their religious belief or their sexual orientation and if that is the case we will need to explore possible claims in discrimination.
Over the years I have acted for numerous executives ranging from age discrimination claims,
on behalf of senior management disability discrimination claims, on behalf of leading academics to sex discrimination or equal pay claims on behalf of senior female professionals.
Another area of specialism is whistleblowing claims, where the executive has been treated less favourably, or subjected to detriment or dismissed, due to the fact that they have made a protected disclosure. The executive has raised a legitimate concern about a possible legal or regulatory breach on the part of their employer, they have raised that concern with their employer in good faith and in the public interest but rather than have those concerns addressed, the executive has then been subjected to detriment, dismissed or forced to leave.
Unlike claims of unfair dismissal, where compensation awards are capped at 12 months’ salary, there is no statutory cap placed on compensation awards in discrimination or whistleblowing claims. In theory (and subject to an obligation to mitigate losses) as long as losses continue to be incurred the potential value of the claim increases. In addition, there is also scope to recover additional compensation for what we refer to as an ‘injury to feeling award’.
I acted for a senior executive, of an international business, who was being made redundant. However, digging deeper, revealed that the executive had previously raised concerns with the Board about certain food items, manufactured in China, but mislabelled as genuine Italian product. Of course, the employer argued it was a genuine redundancy and nothing to do with the previous disclosure but there was no basis for redundancy and importantly, tactically, we knew the employer was unlikely to want to play these issues out in a public employment tribunal. In that case we were afforded time to work with the executive, and to plan his exit strategy. That case settled for a life changing sum of money. I’m confident we made a very real difference in that case.
If the executive is a statutory director, we also need to consider any rights and ongoing obligations she / he has a director and how these might influence the exit strategy and /or be used to advantage. And if the executive is a shareholder, we need to consider how the exit might impact upon their shareholding. Whether the shares can be retained, or, if they are to be transferred, or sold to ensure the executive receives fair market value for their shares. Indeed, the executive may have additional rights as a minority shareholder and if they have been prejudiced, possible further claims of ‘unfair prejudice’ may also arise.
The executive may also be a sales agent; a status which may give rise to claims in respect of lost future commission payments.
Equally important, is to consider what approach should be taken to the negotiation and, at an early stage, we need to identify and agree the executive’s goals. Negotiation strategies are unique and must be tailored, depending on the specific circumstances and the Executive’s preferred outcomes.
Ultimately, many executive terminations will result in a negotiated settlement with the employee required to sign a settlement agreement an agreement which records the fact that, in consideration of the proposed termination payment, the employee agrees to waive their claims against the employer.
It’s important to note that Settlement Agreements are governed by statute and conditions apply.
Conditions which requires the employee to be advised by a solicitor (or certified adviser) of their statutory rights before the agreement can become binding. However, such agreements will often include additional clauses intended to protect the employer and, again, care should be taken to ensure that not only is the proposed termination payment adequate and acceptable but that all other terms of the settlement agreement are also equitable and appropriate. Of course, if you have taken the opportunity to negotiate contractual terms at the commencement of the employment, or, if you have taken advice early then the executive will be better positioned, or at least better informed, as to what their rights and obligations on termination are.
However, confidentiality (or gagging) clauses, non-derogatory statement clauses, post termination restrictive covenants, penalty / repayment clauses etc. are all often included within a settlement agreement and these clauses need to be reviewed carefully and re-negotiated (if necessary), before any settlement agreement is concluded.
So again, take advice and do so early. If you are an employee, or executive facing an employment dispute or looking to exit your employment on best possible term speak to me or a member our Employment Team and, please, do so early. The longer we have to work with you the longer we have to devise an exit strategy the better the likely outcome.
