Cantor poaching case

United Kingdom

The High Court case decided on 29 July 2002 between Cantor Fitzgerald and ICAP generated many column inches of journalists copy.  But there is a serious legal message in the judgment for employers and employees.

The case was brought by Cantor Fitzgerald which claimed that three employees had broken  their contracts by leaving without giving contractual notice.  It also claimed that ICAP had unlawfully induced the employees to commit those breaches.  The employees counter claimed that they had been constructively dismissed and so were not bound to serve out notice.

The High Court ruled that Cantor was guilty of constructively dismissing two employees (Bird and Gill) but not the third (Boucher).  The judgment concentrated on the way in which a new remuneration structure had been introduced at Cantor.  Cantor had replaced the original part-salaried, part-commission arrangement with a new commission only arrangement.  The Judge ruled that the way in which it had been introduced for Bird and Gill had been unacceptable: they had been put under unreasonable pressure to accept the new deal. This had been extreme and abusive and had included much swearing and obscenities. Cantor had then put it into effect unilaterally.  By introducing the new arrangement in this way, Cantor had broken the duty of trust and confidence so the employees were not bound to serve out their notice.

However Boucher’s case was different because the introduction of the new arrangement was handled differently. It was handled in a friendly manner with, it seems, clear explanations presented by a different manager. The Court concluded that Boucher had not been intimidated, insulted or threatened and he had no cause for resigning in the way that he did.  So he was bound to serve out his notice.

ICAP had offered to employ all 3 and Cantor sued it for allegedly inducing the 3 to break their contracts with Cantor by resigning without giving and serving the notice required by their contracts.  Because Cantor lost their case against Bird & Gill, Cantor necessarily lost their case against ICAP over them.  But, because Cantor won its case over Boucher, its claim against ICAP over him had to be considered by the Judge.  ICAP’s defence was that it had a reasonable belief that they had all been constructively dismissed, so could not be guilty of “knowingly encouraging the employees to break their contracts. Knowledge that there would be a breach of contract is the key to legal liability.  While the Judge accepted that ICAP had assessed the situation, he concluded that ICAP were reckless as to whether Boucher had a good case or not, and so were legally liable for poaching him.

This case shows that the manner of handling changes, particularly those as sensitive as changes to remuneration structures, is as important as the business reasons behind them. Good communication with employees is key.

If you would like to know more about this case or ways you business can introduce contractual changes, please contact Simon Jeffreys at simon.jeffreys@cms-cmck.com or on +44 (0)20 7367 3487 or Anthony Fincham at anthony.fincham@cms-cmck.com or on +44 (0)20 7367 2783 or Alex Green at alex.green@cms-cmck.com or on +44 1224 622002