The demise of the News of the World (“NotW”) has come as a result of the phone hacking scandal that has rumbled on for a number of years and, more recently, dominated the news even while at the same time a new country has formed and drought ravages nations further from home.
Besides the obvious issues of privacy and the claims which victims of this behaviour may have against NotW, there could be wider reaching consequences in relation to its former employees. News coverage suggests that employees will be offered employment elsewhere in the News International Group. However it is possible that many of the 200 or so employees affected may ultimately be made compulsorily redundant, or redundant as a result of their rejection of the alternative roles on offer.
It is entirely possible that these ex-employees may find it difficult to secure new employment in the marketplace as a result of the stigma which might attach to them as a result of the alleged corrupt practices of NotW. In the light of a UK scandal of the same magnitude as the Watergate affair, ex-employees may well take steps to protect their interests and negotiations and litigation may follow.
Dismissal in breach of a contractual term (whether an express or implied term) can render the dismissal a “wrongful dismissal”. In such cases, an ex-employee would be entitled to claim for damages to put him in the position he would have been in had the dismissal been effected pursuant to the terms of the contract. Often this is limited to loss of salary and benefits during the notice period.
In every contract of employment there is an implied term of “trust and confidence” between employer and employee. In 1997 the House of Lords held in Malik v BCCI SA [1997] IRLR 462 that part of this implied duty is an obligation on employers not to conduct business in a corrupt or dishonest manner and an ex-employee may be entitled to claim “stigma damages” where the former employer’s dishonest or corrupt conduct has an adverse effect on the individual’s ability to secure new suitable employment. In this way, stigma damages can represent ongoing financial loss suffered (which is usually reserved for compensation in unfair dismissal cases) in relation to loss of career prospects which are reasonably foreseeable as a result of the breach.
Where the ex-employee objectively demonstrates that (1) the employer had dishonest and corrupt dealings with third parties, (2) the ex-employee had no part in those dealings, (3) the dishonesty and corruption has become widely known and (4) in consequence the ex-employee’s future job prospects are damaged, then he will, in principle at least, have a claim for breach of contract and stigma damages.
Employees who are not dismissed may be able to walk out and allege constructive dismissal by virtue of the employer’s breach. Constructive dismissal is a special form of wrongful dismissal, but the remedies would be the same.
In view of the levels of publicity and public outcry, it would appear likely that affected employees may find it relatively easy to demonstrate the required causal link between the employer’s corrupt conduct and the prejudice they suffer in the marketplace as a result.
However, not all employees will be affected in this way as some employers may not be concerned about the employee’s association with NotW, and more junior staff may not be associated so strongly with the newspaper and its conduct in any event. However, innocent senior executives may find that prospective employers are more cautious and it is these individuals which NotW should be most concerned about as their claims will of course be financially greater.
The NotW is clearly at risk of claims from its ex-employees who may be able to frame actions not only if they are made redundant as a result of the newspaper’s closure, but also if they allege constructive dismissal.
It would perhaps not be surprising if NotW is working furiously to agree carefully worded compromise agreements with employees and ex-employees in order to obtain their waiver of any claims including, in particular, claims for stigma damages.
As with all litigation, there is inherent risk and the outcome can never be certain but with time and tenacity, a shaking of the News International money tree by certain individuals may prove fruitful.
Ben Collingwood, Solicitor with assistance from Katie Hill, Trainee Solicitor at Barlow Robbins LLP.
