Published 29 June 2016
The Supreme Court of NSW has ordered that a senior broker who was earning over $400,000 per year and resigned from his employment to take up a lucrative offer from a direct competitor, be restrained for 9 months after a “flagrant breach” of his employment contract.
Mr Anthony Hickey commenced employment in April 2006 with BGC Partners (Australia) Pty Ltd as a senior broker. His role required him to have close working relationships with BGC’s clients, including Deutshe Bank, NAB and Macquarie Bank in which he was required to broker interest rate swaps.
Mr Hickey earned an annual salary of $400,000 with additional bonuses and benefits. His employment contract was for an initial period of three years, but had been extended on a number of occasions. The most recent extension was due to end on 31 July 2018.
The contract was only able to be terminated by either party giving notice in the last two weeks of the fixed term period, after which the employment contract would end three months later. The contact allowed BGC to terminate earlier in limited circumstances, including for serious misconduct or because Mr Hickey was physically or mentally unfit.
Mr Hickey’s contract had a number of post-employment restraints requiring him not to solicit clients away from BGC for a period of 6 months after his employment ended and not to induce an employee to leave BGC for 12 months following his termination. In addition, there was a provision which allowed BGC to exercise an option that Mr Hickey not be able to work in a business which was in competition with BGC for 6 months after his termination, provided that it continued to pay Mr Hickey his pre termination salary.
On 11 November 2015, Mr Hickey signed an employment contract with ICAP Australia Pty Ltd, one of BGC’s main competitors. The terms of the contract were that he would receive a sign on payment of $500,000, would have an annual salary of $300,000 and that ICAP would indemnify him for any legal costs as a result of his change in employment from BGC to ICAP.
On 12 November 2015, Mr Hickey purported to resign from his employment with BGC on the basis that he was accepting employment with ICAP. Mr Hickey stated that he was providing one months’ notice of his termination as this was reasonable, having regard to the Banking, Finance and Insurance Award 2010, which states that an employee is able to resign by giving four weeks’ notice.
BGC objected to Mr Hickey’s purported resignation on the basis that he was not entitled to terminate his employment as he was employed for a fixed term ending on 31 July 2018. Mr Hickey worked up until 11 December 2015 and then did not return to work. BGC stated that they did not accept Mr Hickey’s attempted repudiation but that if they were wrong on that issue, they were exercising the option to restrain Mr Hickey from working for a competitor, in particular, ICAP.
BGC commenced urgent proceedings in the Supreme Court seeking a declaration that Mr Hickey’s employment contract had not been terminated and remained on foot and an order retraining Mr Hickey from breaching his post-employment restraints. As a result of ICAP’s indemnity of Mr Hickey, ICAP was paying Mr Hickey’s legal costs of the proceedings.
Decision
The Court found that Mr Hickey was not entitled to terminate his contract as he purported to do by his resignation letter. It further found that Mr Hickey repudiated the contract, but because BGC did not accept that repudiation, the contract of employment remained on foot and that Mr Hickey remained bound by his obligations not to solicit clients or employees away from BGC’s business.
The Court was then required to determine whether the restraint in Mr Hickey’s contract was reasonable and if so, how long it would last.
The Court found that BGC had a legitimate protectable interest in preserving and promoting its connection with its customers. It therefore needed time to replace Mr Hickey at the front line with its customers and to promote its existing relationship with clients with whom Mr Hickey had dealings with and who may be vulnerable to persuasion by him to leave BGC.
Given that Mr Hickey agreed that he would give three months’ notice of his intention to resign and that, thereafter, he would be bound by the post contractual restraints for three months, the Court found that it would be reasonable to restrain Mr Hickey for a period of nine months. Justice Stevenson was unwilling to restrain Mr Hickey for a longer period, despite his flagrant conduct and breach of the contract.
Mr Hickey was therefore not permitted to work for a business which is competitive with BGC, including ICAP, until 11 September 2016, being nine months from the date his employment with BGC terminated. Given that Mr Hickey’s contract with ICAP required him to commence employment with them by no later than 1 November 2016, it is assumed that he will start employment with ICAP once the restraint ends in September 2016.
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