What should you do if a former employee damages your business?

by Direct 2 Lawyers on December 15, 2012

  • SumoMe

The recent case of Imam-Sadaque v Bluebay Asset Management (Services) Ltd [2012] is a useful reminder to employers (if in fact they needed a reminder at all) that employees can be a problem for their businesses when the employment relationship terminates.

The facts in Imam-Sadaque v Bluebay Asset Management (Services) Ltd

Mr Imam-Sadaque (who joined the firm in 2004) was in a senior position at Bluebay Asset Management (“Bluebay”). He was paid £100,000 in salary in 2010 and received a total remuneration package of £2.45 million – the bulk of the difference being composed of “Fund Units” (share options that would vest if he met particular criteria). An approach was made to Mr Imam-Sadaque in early 2011 to see if he wanted to join a fledgling competitor to Bluebay – Goldbridge Capital Partners. Mr Imam-Sadaque (without the knowledge of his employer) agreed to join Goldbridge and handed in his notice in June 2011, with the notice period expiring in January 2012 (when he would join Goldbridge). Complaints were made about Mr Imam-Sadaque’s behaviour in July 2011 and in August 2011 he signed a compromise agreement with Bluebay. Under the (fairly standard) terms of this compromise agreement he warranted that he had not have new employment and that he was not in repudiatory breach of contract. In return for signing the compromise agreement Mr Imam-Sadaque would be deemed to be a “Good Leaver” and would therefore walk away with his Fund Units. However, Mr Imam-Sadaque did have new employment (with Goldbridge) and – it was found at a later date – had encouraged a friend and colleague of his at Bluebay’s (a Mr Nixon) to join him at Goldbridge. When it was discovered that he was working for Goldbridge Bluebay therefore refused to transfer the Fund Units to him, alleging that he was in repudiatory breach of contract and that they were therefore not bound by the terms of the compromise agreement. Mr Imam-Sadaque issued a claim for breach of contract in the High Court in October 2012. The High Court ruled against Mr Imam-Sadaque, finding that he had in fact been in repudiatory breach of his contract through the breach of express and implied terms.

Read more: What the best compromise agreement lawyers should do for you

How you can tell whether employees or ex-employees are breaching their contract

Mr Imam-Sadaque had, in this case, breached two different contracts – firstly, his contract of employment and, secondly, his compromise agreement with Bluebay. However, Bluebay were only able to determine that he was actually in breach of contract after he had left their employment. This is usual in such circumstances as particular facts will only come to light after the employment relationship had terminated. However, there are certain ways by which employers can determine whether their employees may be in repudiatory breach of contract during their employment or after they leave their employment (among others):

  1. If they exhibit abnormal behaviour during their employment or after their contract terminates
  2. If you learn that they are contracted to a competitor prior to or after their contract of employment; or
  3. If confidential commercial information (that the employee was party to) becomes public knowledge

What you should do if you think that ex-employees are unlawfully harming your business

If you think that current or ex-employees are harming your business by, for example, enticing your employees away or divulging commercial information then you should take action to remedy this. Instead of launching into litigation straight away you should put the offending person(s) on notice that you believe that they have acted in breach of contract. If their actions have caused you loss or they continue to act in breach of their contract then you should consider litigation to prevent further harm and recoup your losses.

Direct 2 Lawyers can put you in touch with expert employment lawyers to give you the best employment law advice on any litigation or compromise agreement.

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