Lottery winners and employers’ rights

What can employers do if a staff lottery syndicate wins millions of pounds, resulting in an immediate mass departure with resulting disruption to businesses?

The recent win by IT staff working for Hewlett Packard shows that it can happen. The short answer is that, unfortunately, there is very little an employer can do to protect itself in these circumstances; however, this article looks at the few possibilities.

The starting place would be to look at the contract of employment. If staff decide to leave en masse without working their notice under the terms of their contract, they would be in breach of contract. It is extremely rare for a court to order specific performance – ie, require an employee to carry out their obligations under terms of their contract – so the employer would need to consider suing the employees for damages for breach of contract.

If successful, the measure of damages for the failure or refusal to work the notice period would be the cost of recruiting replacements, less the amount that would have been paid to the employees under the terms of their contracts. Therefore, if the employer has to engage more expensive agency staff, it may claim the difference. If, however, the employer is unable to find immediate replacements, it may choose instead to sue the employees for loss of profit or consequential loss – ie, the value of the work lost as a result of the employees’ breach.

One solution employers may consider is including a liquidated damages clause in the contract which anticipates the measure of damages in the event of this type of breach. However, although the recent Employment Appeal Tribunal (EAT) decision in Tullet Prebon Ltd v El-Hajjali confirmed that it is possible to have a valid liquidated damages clause in an employment context, employers should be aware that these have to be carefully worded. In Giraud UK Ltd v Smith the EAT held that a clause which stated that if the employee did not work his full notice any shortfall would be deducted from the final salary payment was unenforceable as a penalty rather than a liquidated damages clause, as it was not a genuine pre-estimate of loss. Realistically, this is unlikely to be an option for most employers.

The other way an employer can protect itself in respect of losing a team of people is by including restrictive covenants in the contract. However, these are generally included in the contracts of senior staff and in this scenario, it is not the seniority of the employee which is the issue, but the number of departing staff.

In the Hewlett Packard case, they were all members of the IT department and it is possible that an employer could lose nearly a whole department this way. In any event, restrictive covenants are only effective to stop a group of employees from competing with the employer or soliciting clients once they have left, rather than stopping the employees from leaving in the first place. It is unlikely that employees who have won the lottery would be competing; they are more likely to be on holiday.

The cheapest and most practical option would be for an employer with a good relationship with its employees to appeal to their good will and ask them to work their notice, even if they ultimately decide to leave. The employer can then have sensible discussions with the employees about the hand-over of work and the return of company property.

Although from a legal perspective, there is little the employer can do, the one comforting thought is that this situation is about as likely to happen as winning the lottery!

Caroline Buckley, professional support lawyer, and Gagandeep Prasad, solicitor, Charles Russell

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