A future employer’s dishonesty can release you from a signed job contract.
“A duty of trust and confidence can bind a future employer before you start, and its breach can free you from a signed forward contract.”
A duty of trust and confidence can protect you even before you start a new job, from the moment you have signed an agreement to join.
- If a new employer misleads you or pressures you before your start date, get independent advice before assuming you are locked into the agreement.
- Read the signing bonus, indemnity, and damages terms of any forward agreement carefully; repayment or liquidated damagesA fixed sum written into a contract as a genuine, honest estimate of the loss one side would suffer if the other broke the agreement. Unlike a penalty clause, it is designed to compensate, not to puni... clauses can be significant if things fall through.
- Keep a written record of anything that feels like dishonesty or pressure from a prospective employer. It may matter later if you need to show the relationship broke down.
The situation
A group of brokers at a financial brokerage signed forward contracts agreeing to join a rival firm once they were free to leave their current jobs, in return for signing-on payments and indemnities against legal action from their current employer. A senior manager at the rival firm ran a coordinated campaign to get the brokers to leave together, regardless of whether they actually had lawful grounds to resign. Three of the brokers changed their minds before their start date and stayed with their original employer. The rival firm argued that this was a breach of the forward contracts and sued for damages.
What the court found
The Court of Appeal held that a duty of trust and confidence can exist before someone has even started a new job, once they have signed a binding agreement to join at a future date. It upheld the trial judge's finding that the rival firm broke that duty. The recruiting executive used indemnities to control the brokers' actions and misled them and their own employer in the process. He was also determined to get the group out together, whether or not they had genuine grounds to resign.
Because of that conduct, the three brokers who changed their minds were entitled to walk away from their forward contracts with the rival firm. They were not in breach for staying with their original employer instead.
Tullett Prebon plc v BGC Brokers LP | [2011] EWCA Civ 131 | Court of Appeal | 22 February 2011