Willow Oak Developments Limited (trading as Windsor Recruitment) v Silverwood

Willow Oak Developments Limited (trading as Windsor Recruitment) v Silverwood,
Court of Appeal, 25 May 2006

Background

This case came about after a number of employees were dismissed for failing to accept variations of their contracts of employment that imposed new and more demanding post-employment covenants.

In deciding whether the dismissals were unfair, the tribunal had to consider two questions: first, was there a fair reason in law for the dismissals; and, if so, did the employer act reasonably?

Windsor Recruitment argued that the dismissals were for a ñsubstantial reason of a kind such as to justify dismissalî under section 98(1)(b) of the Employment Rights Act 1996. The tribunal, however, felt the covenants were unreasonably wide and, therefore, unenforceable. Consequently, the tribunal held that there was not a substantial reason to justify these dismissals.

The tribunal also made it clear that, even if the reason for the dismissals had been a fair one, the dismissals would have been unfair anyway due to the unreasonable way in which the employer had tried to introduce the new terms. Among other things, the tribunal found that the director responsible for introducing the new terms had been verbally and physically aggressive and intimidating during discussions, failed to warn staff that they might be dismissed if they did not sign, and behaved in a demeaning and hostile manner.

Appeal

After an unsuccessful appeal to the Employment Appeal Tribunal (EAT), the employer appealed to the Court of Appeal (CA). The CA agreed with the EAT that the tribunal had been wrong on the question of whether or not the dismissal was for a fair reason. It held that, even if the covenants were not legally sound, the dismissals could still be said to be for a potentially fair reason. However, as the procedure adopted by the employer had been unreasonable, it upheld the EAT decision.

Comment

This decision confirms that a dismissal for refusing to accept restrictive covenants can be fair. Whether or not the covenants are reasonable is relevant in deciding fairness, but the EAT said tribunals should avoid getting embroiled in complex discussions about whether covenants are technically enforceable. What this case demonstrates, however, is that, no matter how reasonable the proposed changes, staff must be consulted properly and treated with respect.