Is there a price to pay for suing costly employees

Can companies get back at staff who cost them money by suing them for breach of contract? IT company Coleman Bennett evidently thinks it can.

According to press reports, it is suing a former worker, Terence Hunter, for £250,000. He allegedly had an affair with a colleague, but company procedure required personal staff relationships to be reported in writing, and the relationship distracted him from his work duties.

There are three main issues that usually put employers off suing their staff:

  • the employee may not have the money to meet any claim
  • it hardly sets the right tone for good staff relations; and
  • it can be pretty difficult to prove the exact level of financial loss suffered as a direct result of the employee’s breach of contract.

Most employers settle for proper management structures to catch under-performing staff before the damage is too great, and dismissal to put an end to the problem. However, there have been some successful claims against employees.

In Lister v Romford Ice and Cold Storage Co, the company recovered from an employee the damages it had to pay out to a third party because of the employee’s negligent driving. And the Dean of Westminster successfully recovered fixing fees and surpluses on events that the organist and master of choristers had been retaining for himself.

Employers who want to put themselves in the best position to sue their staff should, as with many aspects of the employment relationship, start with the contract of employment. Useful clauses spell out that the employee must use all reasonable skill and care, and devote all of their time and attention to the company’s business during their hours of work.

A number of employers provide in the contract that if the employee does not give the right period of notice, the employer can deduct a sum equal to the salary for the number of days’ shortfall from the employee’s final payment.

In Giraud (UK) v Smith, the Employment Appeals Tribunal found that this kind of clause is unenforceable because it is a penalty, rather than a genuine pre-estimate of the loss that will be suffered by the company. It was significant that the company reserved the right to recover more from the employee than the contractual penalty, if required.

Usually, employers will not be able to do anything about an employee who leaves on short notice, because any damages they do suffer will be more than covered by the saving in the employee’s salary. If the employer had to get a replacement in at greater cost, or could not find a replacement, there would be more hope of a successful claim. Actor Robert Reed had to pay Anglia TV damages when he failed to play the lead part in a film, and the TV company could not get a substitute.

Employers at the wrong end of a tribunal claim often try to counter-claim against the employee for breach of contract. But they cannot do so unless the employee has first brought a claim for breach of contract. And think carefully before claiming against staff who have raised issues of unlawful discrimination or whistleblowing – it could provoke a claim of victimisation.

Key points

  • Careful contract drafting will put companies in a better position to bring claims against staff
  • The company will have to prove the exact level of monetary loss it has suffered to recover damages
  • Claims against staff are no substitute for good management of their activities while employed

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