Acumen News & Events

11 June 2010

Tullett Prebon Plc and others v BGC Brokers LP

Warning to employers: review your contracts!

The recent case of Tullett Prebon Plc and others v BGC Brokers LP and others [2010] EWHC 484 made clear that employers MUST review their contracts to ensure that they included provisions to protect their business with post-termination restrictions. 

The case:

On 15 April 2008, Anthony Verrier gave his Tullett notice that he would be leaving them on 31 March 2009 when his contract expired. As a result of the post-termination restrictions in his contract, he was not allowed to join a competitor until 1 July 2009. Mr Verrier had signed a "forward" contract with BGC on 22 August 2008, agreeing to join BGC when he was free to do so. Shortly after signing the agreement allegations about Mr Verrier’s private life appeared in the Sunday Times, which he alleged had been provided by the Chief Executive of Tullett.  Mr Verrier then left Tullett and claimed that he had been constructively dismissed and was free to join BGC. Mr Verrier and Tullett reached agreement prior to the trial that he would join BGC on 2 January 2009.

Mr Verrier started work with BGC on 5 January 2009. He decided to recruit brokers to join BGC from Tullett. All in all 13 brokers from Tullett signed contracts to join BGC when their contracts allowed them to do so. Tullett warned its brokers (both those who had signed forward contracts with BGC and those who had not), that it would enforce the provisions of their contracts if they chose to leave early, which included garden leave clauses and restrictive covenants. Three Tullett brokers changed their minds and signed further contracts with Tullett on the understanding that Tullett would provide them with indemnities in respect of any action taken against them by BGC and would repay BGC the sums that had been paid to them as signing payments.

The other 10 employees left in March 2009, claiming that they had been constructively dismissed by Tullett so were not bound by the restrictive covenants in their contracts. In March 2009, Tullett started proceedings against BGC, Mr Verrier and several named employees claiming conspiracy, breach of contract and misuse of confidential information.

The case proceeded to the High Court and lasted a total of 45 days.

Held:

The brokers who left Tullett in March 2009 had not been constructively dismissed. Tullett's claims for conspiracy and inducing breach of contract against Mr Verrier was successful.

Tullett had not induced the three employees who had decided to stay to breach their forward contracts with BGC. Those three employees were entitled to do so as a result of BGC's conduct.

Tullett's claims against the brokers for recovery of loyalty bonuses and the recovery of retention payments were successful.

This case highlights the usefulness of restrictive covenants for employers and the fact that the courts will uphold such restrictions if they are not unreasonable.

Do your contracts of employment have the reasonable restrictive covenants in? For further advice on this matter please call us today on 01244 357 211.