Employer’s intention important in constructive dismissal claim

10 Mar 2011

In the case of Tullet Prebon Plc and ors v BGC Broker LP and ors, the Court of Appeal decided that, when considering whether an employer’s actions towards an employee amounted to a repudiatory breach of contract, entitling the employee to claim constructive dismissal, it is important to closely consider the employer’s intention.

The facts of the case were that TP and BGC are two of the main players in the small and highly competitive interdealer broking market. BGC approached a number of brokers at TP and secured ‘forward contracts,’ in which they agreed to commence employment at BGC as soon as they became free to do so.

TP found out about the forward contracts and attempted to convince the employees to stay at TP. Nine brokers claimed that TP’s attempts to persuade them to breach their forward contracts constituted a repudiatory breach of the mutual term of trust and confidence, enabling them to claim constructive dismissal and start work for BGC.

TP initiated proceedings in the High Court to prevent this and BGC counter-claimed that the three employees who remained at TP had breached their forward contracts.

The High Court decided that the brokers had not been constructively dismissed. It decided that TP’s aim had been to try to persuade their brokers to stay and not to attack them for signing forward contracts with BGC.

BGC’s counter counter-claim was rejected on the basis that BGC had breached implied terms of trust and confidence in the forward contracts by the way it conducted its campaign to poach the brokers. BGC appealed.

The Court of Appeal rejected the appeal in relation to the constructive dismissals. It considered whether TP showed an intention to “abandon and altogether refuse to perform the contract”. It decided that this was a question of fact and that the High Court judge was entitled, and correct, to find that TP did not have an intention to abandon and refuse to perform its contracts with the brokers, but rather the intention was to persuade the brokers to stay with it.

The appeal against the rejection of the counter-claim was also dismissed. Even though the brokers were not yet in BGC’s employment, the Court was right to find that the forward contracts contained a mutual obligation of trust and confidence because the forward contracts were ‘more akin to a contract of employment, rather than a purely commercial agreement’.

As a result of this case and other similar cases over the last few years, the legal risk for employers and employees engaging in team moves is high. There are numerous express and implied obligations which can easily be breached.

Whilst, in general, employees are free to leave employers and set up in competition, having any material involvement in a large-scale defection, while still in employment, is very likely to breach an employee’s implied contractual duty of fidelity.