Litigation with wayward employees is always an unpleasant affair. If you have commenced the litigation against the employee, it will usually be because they have breached their confidentiality provisions or restrictive covenants, putting you at risk of losing important business or trade secrets. More often it is the employees who sue you, claiming unfair dismissal or arguing over unpaid bonuses and the like.

Whatever the situation, throughout any litigation employers will often re-assess whether continuing the case is a good idea. Employers reflect on the seriousness of the issues involved, the question of precedent (for other employees) and the message ‘the fight’ sends to employees and the world generally, the amount of management time needed to deal with the case and the cost (in terms of payments to the employee, impact on the business and legal costs). Balancing these different, and sometimes competing, considerations is not easy. Neither is comprehending the lingo that your solicitor may use.

Some of the common phrases are:

Repudiatory breach

If one party to a contract breaches its terms in a serious way which undermines the whole purpose of the contract, then the other party is entitled to treat that act as a repudiatory breach of contract. If you can assert that the other party’s actions amount to a repudiatory breach then you are very much in the driving seat, but you need to act promptly.  Where a repudiatory breach occurs, the injured party can choose to end the contract immediately or to forgive the breach and continue the business relationship. Regardless of the choice made, the injured party retains the right to sue for any loss. However, where the injured party decides to end the contract, it is released from performing any further obligations under the contract. Recently departed employees often allege that non-payment of a discretionary bonus is a repudiatory breach, which releases the employee from complying with the ongoing terms of the contract. If proved this would mean that the employee is no longer bound by any post-termination confidentiality requirements or restrictive covenants.

ADR

This stands for ‘Alternative Dispute Resolution’ and is an umbrella term for several different dispute resolution methods, including mediation (‘shuttle-diplomacy’ using an independent mediator), arbitration (private litigation which is heard by an appointed arbitrator, rather than a judge) and independent expert evaluation (the parties agree to be bound by the decision of an independent expert). Courts and tribunals are increasingly keen that litigants try to resolve their disputes using ADR at the earliest opportunity. Whether it is appropriate to use ADR will depend on the particular factual and legal scenario (as well as the identity and attitude of the decision-makers on each side). However, you will need to consider with your solicitor at an early stage of any dispute which (if any) ADR tool might be an effective way to resolve matters. Litigants who unreasonably refuse to use ADR now risk being penalised on costs for their intransigence.

Without prejudice

The term ‘without prejudice’ relates to the admissibility of evidence. For public policy reasons the law encourages litigants to settle their differences, rather than taking the matter to trial.  In order to create an environment between the parties where they are willing to make concessions and compromises, it is not considered fair for any settlement offers or concessions between the parties to be disclosed to the court or tribunal. This is because disclosure of that information may influence the outcome of the case, and that possibility would discourage many litigants from making any kind of compromise or settlement overtures (which would frustrate the objective of the public policy). Therefore any communications between litigants that are genuinely aimed at trying to reach a settlement of a dispute will be considered to be without prejudice and cannot be shown to a court or tribunal. This rule applies even if proceedings have not yet been issued.  

Costs orders

In County Court or High Court proceedings successful litigants are usually entitled to have their reasonable legal costs paid by the losing litigant. There are two ways that these costs may be assessed: either on the standard basis or on the indemnity basis. In the majority of cases successful litigants will be entitled to recover their costs on the standard basis. In practical terms this means that the losing litigant will be ordered to pay about two thirds of the successful litigant’s legal costs (although the actual percentage paid will depend on the reasonableness of the fees incurred and could range from 50% – 75%). The losing litigant will also have to pay all of their own legal fees, while the successful litigant will still need to pay the balance of their legal fees. On rare occasions the successful litigant may obtain an indemnity costs order. In that situation the losing litigant will have to pay almost all of the successful litigant’s costs (subject to any arguments about the reasonableness of the costs), as well as their own.

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