Employment Law Cases

McCormack v Medivet Group Ltd

A CEO’s decision to take core responsibilities away from a senior employee and transfer them to others amounted to a repudiatory breach of her employment contract justifying her decision to leave and entitling her to damages.

Background

Dr McCormack was employed by Medivet as Director of Clinical Operations, responsible for day-to-day operations and various central functions (akin to a COO role). Medivet was bought by CVC who installed Mr Cools as the new CEO. He decided that Dr McCormack was overstretched and poorly organised. He wanted people other than her to handle some crucial aspects of the business. Acting on the Medivet board’s behalf, Mr Cools decided to transfer Dr McCormack’s responsibilities for pricing and property and maintenance to other employees. He also decided to give her a new job title, Chief Clinical Officer, that better reflected the new scope of her duties.

Dr McCormack’s contract of employment stated that ‘the Board shall be entitled from time to time to appoint any other person or persons to act jointly with [Dr McCormack] in the office which she then holds under this agreement or to change the Executive's executive office or its responsibilities and powers as it shall think fit’.

Dr McCormack resigned. She argued that these changes were done without proper consultation and in breach of her contract. She made a breach of contract claim for damages for loss of salary, company car, holiday pay, nursery care fees, pension and other benefits, but not in the employment tribunal, where compensation would be capped, but in the High Court as a breach of contract claim. The issues for the High Court were whether Medivet was in repudiatory breach of her contract and whether she was entitled to damages.

High Court decision

Dr McCormack’s claim was upheld.

The decision unilaterally to divest Dr McCormack of some of her responsibilities and transfer them to other employees and allocate a new role to her, was not taken and communicated properly in exercise of the board’s powers under the flexibility clause. There had been no consultation or consideration of her suitability and willingness for the new role. Those decisions gave rise to a repudiatory breach of her contract of employment. Having accepted the breach and terminated her contract, she was entitled to damages for breach of contract.

The flexibility clause conferred discretionary powers which were exercisable unilaterally to Dr McCormack’s disadvantage. It was therefore implicit that the company would exercise them honestly, rationally and for the purpose for which they were given. The powers were conferred in the interests of good management to apply where there was good reason to appoint others to work with Dr McCormack or change her responsibilities.

The court also found that the company’s conduct as a whole, culminating in its failure to engage properly with her formal grievance, amounted to a repudiatory breach of the implied term of mutual trust and confidence between employer and employee.

Comment

This was a case litigated in the High Court rather than the employment tribunal. In the case of senior staff, the law will imply a contractual obligation to be at least as flexible as other staff of an equivalent status. However it is always preferable to include an express provision enabling the employer to require the employee to undertake different duties.

However, the decision is an example of the limitations of contractual flexibility clauses, which should always be exercised reasonably and cautiously to avoid the risk of breach of contract or constructive dismissal claims. While it’s generally a good idea to include a flexibility clause in employment contracts, remember that a court will construe such clauses strictly against the interests of the employer seeking to exercise the power and so consultation and reasonableness will be required.