Case update
Job redesign was a repudiatory breach of contract
Background
In McCormack v Medivet Group Ltd [2024] EWHC, the High Court had to consider the extent to which an employer can exercise its powers where it has a contractual right to change the role and duties of a senior executive.
The case concerned Dr McCormack, a Director of Clinical Operations at Medivet, whose service agreement enabled Medivet to appoint another person to act jointly with her or to change her executive office or responsibilities. A new Chief Executive Officer (the CEO) joined Medivet following a corporate acquisition and after meeting with Dr McCormack decided that whilst Dr McCormack was overstretched; her role was too broad; she was poorly organised; and unable to keep up with her responsibilities. The CEO subsequently proposed to change Dr McCormack’s job title to Chief Clinical Officer and reallocate Dr McCormack’s key responsibilities amongst certain other senior executives. Dr McCormack objected to the CEO’s actions. She resigned and brought a breach of contract claim in the High Court.
The High Court agreed with Dr McCormack. It considered the provisions in Dr McCormack’s contract enabling Medivet to unilaterally change her duties to her detriment should have been exercised “honestly, rationally and for the purpose for which they were conferred”.
The CEO’s actions were stated by the Judge to be “irrational”, “premeditated” and with “no meaningful assessment as to how Dr McCormack's interim and final responsibilities should be allocated”. Given Dr McCormack’s seniority, she ought to have been properly consulted with on any significant changes to her terms of employment. Dr McCormack was awarded damages for breach of contract.
"...the parties cannot have intended Medivet’s reserved rights to be exercisable without limit. Since the reserved rights conferred discretionary powers on Medivet which were exercisable unilaterally to Dr McCormack’s disadvantage, it was implicit that Medivet would exercise such powers honestly, rationally and for the purpose for which they were conferred."
(para. 65 of the judgment)
Key takeaway
The case serves as a useful reminder that even where an employer has a contractual right to change the scope of an employee’s duties without consent, any such changes should be made in good faith and in a way that is rational and reasonable. Remember, employers and employees are subject to an implied, mutual duty of trust and confidence and cannot act in a way to undermine the employment relationship.
Employers should be alive to the risk of imposing material changes to an employee’s detriment, such that an employee alleges a claim for either breach of contract and/or constructive unfair dismissal. Legal advice should be sought before engaging in any such activity, particularly in light of Labour’s proposed reforms to the practice of “fire and re-hire” (i.e., dismissing employees and offering to employ them on new, less favourable, terms). Such reforms will likely require employers to have more than a ‘substantial reason’ for changing terms of employment (as is the current position) and will provide ‘effective remedies’ to employees if employers abuse the practice.