Can you rely on an employee’s breach of contract to avoid paying notice pay?

The one with the obscene, pornographic email and the Director of a football club

This weeks’ case is a really interesting one, and the fact that it involves a Football Club as the employer has made it even more high profile. The case this week involves a situation where the employer, Leeds United Football Club, actively looked for misconduct of the employee which they could rely on to dismiss without paying fairly hefty notice and redundancy pay.

The Law

Where an employee’s employment contract contains a clause regarding the length of notice that the employer is required to give, the employer is contractually bound to adhere to this.

In the case of senior employees it is not uncommon for employment contracts to include lengthy notice periods, and in the event that the employer wishes to terminate the contract they must give notice or pay in lieu of notice.

If either party does something which is a fundamental breach of one of the express or implied terms in the contract the other party is entitled to terminate the contract with immediate effect. In the case of an employer and employee relationship, if the employee is guilty of misconduct, which is sufficiently serious to be a repudiatory breach of the contract, the employer can terminate the contract without notice.

The Facts

Mr Williams was Technical Director for Leeds United Football Club. As a Director he received a salary of £200,000 per annum and his contract included a notice clause of 12 months.

In 2013 Leeds United began a restructuring exercise and as a result they gave Mr Williams notice of redundancy. His post was no longer required under the new structure and on the 23^rd July 2013 he was given 12 months’ notice in accordance with his contract terms.

At the same time as starting the redundancy exercise Leeds United appointed forensic investigators to go through their systems and emails to try to find any evidence of misconduct by the senior staff members who were at risk of redundancy.

On the 24^th July 2013 the investigators found a lewd email within the system from March 2008 (some 5 years earlier). The email had been received by Mr Williams and then forwarded on to a former colleague (who now held a senior role at another club); a junior female employee, and to a second former colleague. The email was titled ‘Dirty Leeds’. For those of you who don’t follow football, I could not help but laugh at this when I read it as Leeds United are known as ‘Dirty Leeds’ by other supporters.

As a result of this email and its content Mr Williams was invited to a disciplinary meeting. He failed to attend and Leeds United dismissed him for gross misconduct on the 30^th July 2013. This meant that he received no notice or redundancy pay.

Interestingly the Managing Director had been instructed to stop all payments to Mr Williams on the 22^nd July 2013, one day before notice was served and two days before the discovery of his misconduct. Clearly the employer had been confident that they would find some misconduct.

As you would expect Mr Williams pursued a claim in the High Court for breach of contract claiming that he should have been paid his 12 month salary for his notice period.

The Decision

The key points of Mr Williams argument were that;

• The misconduct relied on by Leeds United took place 5 ½ years earlier;
• The conduct alleged did not amount to a fundamental breach of contract;
• Leeds United had been actively looking for misconduct to avoid making a large payment to him.

The High Court disagreed with Mr Williams and they considered that his behaviour in forwarding the email on, particularly to a female colleague who was junior to him, was sufficiently serious to justify his immediate dismissal.

With regards to the fact that the email was sent some 5 ½ years earlier the High Court considered that Leeds United could rely on this as they only found out about it prior to dismissal.

Finally, the fact that the employer had been motivated by money and were themselves in breach of contract did not mean that they were prevented from relying on Mr Williams breach of contract to justify dismissing him without notice.

Mr Williams was a senior employee who had an implied duty of trust and confidence to his employer and he breached this, therefore he was not entitled to notice pay.

Points to note

Whatever your thoughts on the moral issues here it is an interesting point and reminder of the basic obligations which flow between employer and employees.

The key point in this case was that the conduct of Mr Williams was serious, and that Leeds United did not know about it when it happened. In the event that the misconduct had been known to them at the time or at any time after, but before the decision to dismiss, they would have affirmed the contract and would not have been able to rely on it later on.

Often employers will tell me about misconduct (minor or serious) of their employees, and they are reluctant to deal with it formally because of the stress or potential upset it could cause. This case reiterates that you should deal with issues as and when they arise, and certainly should not delay, as you may not be able to rely on them later on.

The reason that Mr Williams pursued his claim in the High Court and not the Employment Tribunal is because the value of his claim would have been in excess of £100,000 (being net pay for 12 months). The cap on compensation for breach of contract in the Employment Tribunal is currently £25,000, and therefore even if he had succeeded he would only recover £25,000.

Case

Williams v Leeds United Football Club