Operational efficiency HR toolkit
Legal-ease
Can employers
demand loyalty from
their employees?
The prime minister recently
expelled 21 rebel MPs from the
Conservative party for alleged
disloyalty. Some employers perhaps
looked on this and wished life was
so straightforward when dealing
with employees.
Staff do owe duties to their
employer that seem close to
a requirement of loyalty.
However, these duties have
some significant limitations.
All employees owe an implied
duty of good faith and fidelity to
their employer. But this is often
overstated as a duty to act in the
best interests of the company. In
fact only employees in fiduciary or
quasi-fiduciary positions (such as
directors or some very senior
managers) owe this more onerous
duty. Ordinary staff owe a more
limited duty, which at its highest is
not to act contrary to the interests
of their employer.
Employees are also bound by
the implied duty of trust and
confidence – a duty not to do
anything that intends to or is likely
to do irreparable damage or destroy
the relationship of mutual trust
and confidence.
Courts and tribunals will
generally set a high bar where an
employer seeks to demonstrate a
breach; especially if that breach is
alleged to involve a failure to act
rather than a wrongful act.
Employees must obey lawful and
reasonable instructions, which is a
form of loyalty. However, courts
and tribunals will scrutinise each
instruction to determine whether it
was both lawful and reasonable.
The statutory right not to be
unfairly dismissed imposes
procedural requirements and a
substantive obligation to act
proportionately when dismissing
disloyal employees. For example,
the appropriate sanction for
disobeying a lawful and
reasonable instruction will
depend on factors such as
length of service, disciplinary
record and the nature of
the instruction.
Equally, employees are protected
against unlawful discrimination
and benefit from whistleblowing
protections. These rights can act to
narrow the scope of what may
properly be regarded as disloyalty.
An instruction to do something
that contravenes a religious
belief may not be a reasonable
instruction, for example. Staff who
blow the whistle are protected even
though they may be acting in a way
that is contrary to the interests of
their employer.
Employers can clarify the extent
of an employee’s duty of loyalty
by including specific terms in a
contract of employment. For
instance: imposing positive
reporting obligations where
wrongdoing has occurred or risks
to the business are identified.
However, express terms are also
subject to and limited by statutory
employment rights. For example,
an obligation of confidentiality
used to conceal unlawful acts will
not be effective.
The point is not that employers
cannot discipline disloyal staff. But
the extent of that will depend on
the nature and circumstances of any
disloyalty, its potential impact on
the business, and will be a balancing
exercise against the employee’s
substantive and procedural
employment rights.
Dan Peyton is managing
partner at McGuireWoods’
London office and heads up
its employment law practice
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44 HR October 2019 hrmagazine.co.uk
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