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The perils of unsigned contracts of employment and of rushing to Court

There are numerous important lessons to be learned from the judgment in Tenon FM Limited v Cawley which was handed down orally on Wednesday 25th July 2018 by HHJ Bidder QC sitting as a Judge of the High Court but the main ones are:

  1. Do not underestimate the difficulty of persuading a Court, even at the interim stage, to enforce restrictive covenants in a contract which the employee has not signed;
  2. Where an employer is seeking to enforce restrictive covenants which it has introduced after the commencement of the employment, make sure its evidence in support sets out the consideration that was provided in respect of the same; and
  3. Absent any real urgency, give the employee a genuine opportunity to respond to the employer’s concerns before issuing proceedings.

The Applicant employer’s failure to secure interim relief in this case, in which Chris Quinn of Littleton acted for the First Respondent employee, was due to its failure to abide by any of these strictures and culminated in a judgment which concluded that there was “much force in the Respondents’ complaints that the Applicant’s conduct had been unreasonable/ vexatious.

Ms Cawley had commenced employment with Tenon in 2008 and by the time she gave notice of termination on 3rd May 2018 she was its Operations Director and a member of its Senior Leadership Team. Tenon’s case was that initially she was employed by a written 2008 contract but that this had been replaced by a 2011 contract. Although the 2008 contract contained certain restrictive covenants, those in the 2011 contract were more onerous. Tenon had been unable to locate a signed copy of either contract. Ms Cawley said that this was because she had refused to sign them because she did not agree to the restrictions.

Tenon’s evidence was that its investigations into Ms Cawley’s conduct had uncovered an attempt by her to recruit another one of its employees on behalf of the competitor company which she herself intended to join.

When Tenon had first written to Ms Cawley about its concerns it had given her 12 hours to respond. In any event its letter before claim made it clear that proceedings would be commenced regardless of any response. It then served the application for interim relief on her on the eve of her father’s funeral despite (i) knowing that this was the case and (ii) (as held by the judge) there being no apparent need to do so.

The first hearing of the application came on before Mr Justice Sweeney and was disposed of by consent with Ms Cawley giving undertakings to the Court until the then anticipated expiry of her garden leave (she subsequently claimed to have been constructively dismissed but nevertheless agreed that she would continue to abide by the same). Directions were given for all issues as to the remaining  interim relief that was sought, namely the enforcement of the restrictive covenants. Shortly before that second hearing Tenon discovered a yet further unsigned contract, containing the same restrictive covenants, and relied on that 2012 contract as opposed to the 2011 contract. Its evidence in support was silent as to whether any consideration had been provided in respect of any the covenants it sought to rely on.

According to its Statement of Costs, Tenon had spent c.£200,000 making the application.

The Judge held that it failed on several fundamental issues. In respect of the fact that the employer could not produce a signed contract, he found that Ms Cawley’s positive evidence that she had refused to sign the same was not effectively countered by Tenon. He held that the position was even clearer in respect of the complete absence of any evidence as to the required consideration for the covenants and that this “cannot have been an issue that the Applicant was not aware of”. He was then critical of the way in which the application had been pursued and stated that the costs incurred by the Applicant were “clearly disproportionate” which was itself a further factor that he took into account in refusing the application.

Chris Quinn was instructed by Gemma Carson, Andrew Spooner, Kelly Schofield and Tariva Thomas of Wright Hassall LLP.

CLICK HERE for the judgment.

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