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'Make sure you sign on the dotted line'15th October 2018 Employment
Tenon FM Limited v Cawley  EWHC 1972 (QB)
The Claimant, Tenon, is a large facilities management company with a large customer base throughout the UK. Ms Cawley, the first defendant, was Operations Director at the company, having risen through the senior management ranks from when she joined Tenon on 1 May 2008. The employment contract that governed Ms Cawley’s employment from 1 May 2008 did not appear to have been signed. Limited restrictive covenants were present in the 2008 contract. In December 2011, Ms Cawley was promoted to the position of Regional Operations Director. A new contract was prepared, and this contained a number of post-termination restrictions which were considered to be far more onerous on Ms Cawley. In addition to this, and unlike the 2008 contract, the 2011 contract had an express term stating that the contract was effective from the date of signature. This contract was also unsigned. A further contract was prepared for Ms Cawley to sign in December 2012, with identical restrictive covenants and the same caveat that it was not effective until it was signed. This contract too, was unsigned.
In May 2016, Tenon entered into a service contract with B38 Support Services Limited, the second defendant. On 3 May 2018, Ms Cawley provided her contractual three month notice of resignation, and adduced that her final working day would be 3 August 2018. On 10 May 2018, B38 gave Tenon three months’ notice to terminate their contract. Tenon contended that Ms Cawley resigned because she was intending to work for B38. Ms Cawley explained that she resigned because she was unable to work for the new CEO, who she found “arrogant and dictatorial„. Tenon argued that they became aware on 1 June 2018 that Ms Cawley may have been in breach of her obligations to them as they believed she had already begun working at B38, had solicited a senior employee of Tenon to join her at B38, and that she had disclosed confidential Tenon information to B38. The Claimant sought urgent injunctive relief to enforce the post-termination restrictions against Ms Cawley, and an injunction to stop B38 from inducing her to work for it.
Injunctive relief rejected
HH Judge Bidder surmised that Tenon had failed to prove that there was any valuable, or even adequate consideration, for Ms Cawley having entered into either the 2011 or 2012 contracts which contained more onerous restrictive covenants than the 2008 contracts. In addition, there was an absence of a signed contract showing that Ms Cawley had agreed to enter into the new contracts. He therefore rejected Tenon’s application for injunctive relief.
Why were the contracts unsigned?
Ms Cawley presented evidence that she did not sign the contracts simply because she did not wish to enter into the more onerous restrictive covenants. HH Judge Bidder found no evidence that this was not the case although there were emails from Tenon’s (former) HR Manager chasing Ms Cawley to sign the contract, these were not followed up and the contracts were left unsigned. HH Judge Bidder indicated his surprise that Tenon did not ask their former HR Manager to provide a statement to the Court in support of their application.
Counsel for Tenon also put forward arguments that acceptance of an employer’s offer to contract on specific terms need not be by signature, but can instead be inferred from conduct. Whilst HH Judge Bidder agreed with Counsel on this point, he contended that this argument was not relevant. Restrictive covenants come into effect post-termination of the contract, and it was therefore impossible to infer conduct in this regard.
Additionally, and crucially, the 2011 and 2012 contracts also specifically stated that they only came into effect once signed. HH Judge Bidder therefore concluded that Tenon would fail on the issue of enforcing the contract at trial.
Was adequate consideration given?
HH Judge Bidder was conclusive on this point and found that there was no evidence of adequate, let alone valuable consideration given for Ms Cawley entering into either the 2011 or 2012 contracts. Counsel for Tenon had advanced the argument that an employee continuing to work, and the employer continuing to employ, can constitute consideration for a consensual variation of the contract this argument was rejected, and no consideration was found.
HH Judge Bidder did also consider the enforceability of the restrictive covenants. Despite concluding that the duration of the covenants was reasonable, he highlighted that at least two of the senior leadership team, of which the first defendant was also a member, did not have restrictive covenants in their contracts. No explanation was provided by Tenon for this irregularity, with HH Judge Bidder describing the evidence put forward by Tenon as weak and inconsistent.
What can be learned?
Adequate consideration should also be present, and appropriately documented, if there are any contractual variations that take place, particularly in relation to post-contractual restrictions.
Clearly, and most importantly, employers should ensure that all contracts of employment are signed and agreed. Additionally, any restrictive covenant present in an employee’s contract should be replicated in another employee’s contract, and this comparator employee should be of a similar level of seniority. If the comparator employee does not have the same restrictive covenants, this may well harm the employer’s future ability to enforce them.