Complainant

Respondent

Anonymised Parties

Assistant Leisure Centre Manager

A Hotel

Act

Complaint Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under Section 8 of the Unfair Dismissals Act, 1977

CA-00028843-001

04/06/2019

The Respondent is a Hotel and said that the Complainant commenced employment with it on or about 16 October 2001 as an attendant in its Leisure Centre. As of 2009 the Complainant was working three days a week 23.5 hours per week. The Respondent said that this arrangement was based on an agreed basis between both the Respondent and the Complainant. The Respondent said that it was aware that he was involved in paid training of GAA teams.

The Respondent said that throughout the years subsequent hours became available and he never showed any interest. It said that in the end of 2017 the position of spa manager became available and having shown initial interest he never applied for the position.

The Respondent said that his job responsibilities prior to termination of his contract included, inter alia, Management, programme organising and teaching a variety of fitness classes; Management, programme organising and teaching a variety of fitness programmes for members; selling the facility in conjunction with the staff to encourage new members; marketing and promoting of the leisure centre, including on social media and complementing the respondent company’s marketing strategy.

The Respondent said that in early January 2019 it became aware from advertisements on social media that the Complainant was involved in establishing another commercial activity similar to the work he did with the Respondent. The Complainant was invited to a meeting with the Respondent’s General Manager, Mr. A, on 17 January 2019 to discuss the new business. At the meeting he was asked what the business was and if he saw a conflict of interest in the new venture and the role he held with the Respondent. The Complainant said that it was not full time and that himself and another had taken a year’s lease on the premises and it would be run in the mornings and evenings.

The Respondent said that it raised the issue that his new venture was in direct competition with it, his employer, and that he has never informed them about this, and they discovered it themselves inadvertently. The Respondent said that the Complainant said that he was not in a position at that time to compete with the hotel as he did not have the facilities. Mr. A advised the Complainant that he felt there was a conflict of interest and asked him to prepare a report setting out his position. Mr. A said that he would consider the arguments and would bring it to the attention of the Respondent’s owner, Mr. B.

The Respondent said that Mr. A received an email on 21 January 2019 from the Complainant stating that he felt that he had said all that was needed to be said to him in his office, as far as he was concerned there was no conflict of interest, that he had made his decision and he did not feel the need to make any further comment.

The Respondent noted that the following day it noted a further advertisements about the opening of a “new gym” and it included the list of classes on offer and the membership fees. The Respondent said that the facility was “a mere two kilometres from the Respondent’s hotel and leisure centre” in a small town.

The Respondent said that a further meeting took place on 24 January with Mr. A. where the Respondent stated that there was a conflict of interest and noted that the Complainant had not provided a report although he was given the opportunity to do so. It said that the Complainant was informed that it was the Respondent’s desire that he would remain working with it but that as he was in direct competition it could not choose both and he had to decide. The Complainant said that he did not believe that there was no conflict he was aiming at a different clientele and network to that of the Respondent and nothing changes.

A further meeting was arranged for 25 January 2019 and the proprietor attended. Mr. B raised two issues, namely that the Complainant’s venture was aimed at the same pool of clientele and the same pool of money. The Respondent said that the Complainant had knowledge of the Respondent’s business plans short, medium and long term. Mr. B said that he viewed the new venture as on the Respondent’s doorstep and was a rival business. The Respondent said that could not see him engaged in both businesses, but it was willing to allow the Complainant some time to consider his position for a week and another meeting was arranged for 31 January 2019, where a final decision would be made. The Respondent said that the Complainant said he was adamant that he would not be changing his mind.

The meeting of 31 January was held between the Respondent and the Complainant. The Complainant was asked if his view had changed to which he said no. The Respondent said that his contract would be terminated unless he chose not to work with a competing business as there was a conflict of interest. The Complainant was given until the following day to confirm that he would quit his external business, or his contract would be terminated. The Respondent said that the Complainant had raised that there was no expressed restrictive covenant contained in his contract. The Respondent said that this was not relevant to the competition/conflict of interest and observance of duty of loyalty and fidelity while still employed.

The Respondent said that the following day Mr. A received an email from the Complainant, insisting on his right to work both for the Respondent and run his other business. The Respondent said it had no other choice but to give the Complainant notice of termination of employment effective from the 31 March 2019. This letter was issued on 7 February 2019. The Respondent said that the Complainant’s choice had put its own business at risk, with the possibility of poaching current clients, potential clients and it said that the Complainant had approached a member of staff about working for him in is new business. He had access to confidential business and client information. The Respondent said that no reasonable business could assume an entitlement to carry on in this manner. It claims that it carried out its investigation in a fair manner at all times.

Legal submissions

The Respondent relied on a number of authorities in support of its case with regard to employees who seek to set up competing business inter alia the decision in Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] 1 All ER 350 and Wessex Dairies Ltd v Smith [1935] 2 KB 80 here the courts discussed the need for a duty of good faith and fidelity and the potential disclosure of confidential information and the where the employer is entitled to seek information from an employee to determine whether there is a possibility of a conflict of business and the protection of its business in that circumstances.

The Complainant said that he was employed as an assistant manager in the Leisure centre of the Respondent in a full-time capacity since October 2001. He said that in 2009 due to a reduction of business, he was informed that his hours were to be reduced to a 23 and half hour week usually worked over a three-day period. He said that he was always involved with the training of sport teams and he did this as aid to help supplement his income, he said the Respondent was very aware of this and it never raised any concern. He said other instructors in the Respondent would also have their own private fitness type business and it would be a norm in the industry. The Complainant said that he was never asked to take up a full-time position after 2009.

The Complainant said that he was called into a meeting with Mr. A to discuss the gym business that he had set up with one other person in the community and was taken back that the Respondent had an issue with his other project, because it never had an issue in the past. He went to great lengths to explain the different category of clientele that he was aiming at as compared to the regular leisure centre member and user.

The Complainant said that he presented his case to Mr. A in the meeting of 17 January 2019. He had said what he felt he needed to say, and that there was no need to compile a report setting out the differences in the two businesses -the Respondent’s and his new gym- he was clear in his mind that there was no conflict. The Complainant said that he was unfairly targeted by the Respondent.

The Complainant said that he knew as of 24 January 2019, at the second meeting, that his job with the Respondent was on the line. The Complainant confirmed that he had an array of meetings with the hotel to discuss the matter but he was adamant that there was no issue or conflict and there was no need to discontinue with his external business and he decided that he was not going to make that choice.

The Complainant confirmed that he was placed on gardening leave for 8 weeks from 7 February 2019 and his termination was effective from 31 March 2019.

The Relevant Law

Section 6(1) of the Unfair Dismissals Act 1977 provides that:

“Subject to the provisions of this section, the dismissal of an employee shall be deemed, for the purposes of this Act, to be an unfair dismissal, unless, having regard to all the circumstances, there were substantial grounds justifying the dismissal.”

In such cases the burden of proof rests with the Respondent to establish the substantial grounds justifying the dismissal of the Complainant. The Respondent said that the Complainant was dismissed because he set up a competing business in a small town aiming generally at the same pool of people that the Respondent was attempting to cater for in its leisure centre. It learned about this by accident and sought reassurance from the Complainant that it was a different business aimed at a different pool of people. The Respondent said that it considered this to be a breach of trust and a contravention of the Complainant’s implied terms of his contract of employment.

The questions I deem that need to be considered and decided are: (1) Was it reasonable for the Respondent to dismiss the Complainant and (2) was the process that ended with his dismissal a fair process?

Was the Decision to Dismiss Reasonable?

The Respondent’s case is that the Complainant was in breach of his contract by setting up a gym and offering a range of services just a couple of kilometres from its leisure centre business while insisting that he could carry on working with the Respondent. It said that it approached him a number of times to highlight the conflict of interest and said that he was adamant that he did not need to change plans as there was a substantial difference in the classes and clientele he was attempting to attract.

The Complainant said there would be no conflict. Whereas, the Respondent was worried that a competing gym was opening, offering similar type fitness facilities and classes as it was trying to provide in a small town, while at the same time the Complainant would still have access to all its client base information, access to strategic plans for its leisure facility and direct face to face access of the pool of people wishing to avail of training type facilities. This is also in the knowledge that the Complainant had heavily invested his own money in the project and would of course want to ensure that it not only worked but prospered.

It is my view that the Respondent was entirely within its rights to raise a question as to the Complainant’s venture and had sought information from him in the first instance about the possible conflict of interest. I am satisfied that there were a substantial number of serious questions to be addressed and answered and I note a rather blasé response from the Complainant. He sought not to address the request for a report and continually adopted an approach that the market he was aiming at was different. I am satisfied that there were substantial merits supporting the Respondent’s view that there was a conflict of interest and therefore a breach of the implied terms of his contract of employment.

The issue of a conflict of interest and an employee’s setting up their own competing business is addressed in Desmond Ryan book “Redmond on Dismissal Law” (Bloomsbury, 2017) at paragraph 16.89. The author refers to the EAT case of McDermott v Kemek Limited / Irish Industrial Explosives Limited, [1996] ELR 233 where the general principles relating to employees in these circumstances were set out:

“1 It is perfectly legitimate for an employee to aspire to set up in business on his own account.

2 Such a person would consider it normal to work in the industry with which he was familiar. It would be contrary to public policy to prevent someone from setting up in competition with his employer.

3 However, an employee’s duty of fidelity continues so long as he remains in employment. There may be a point at which preparations to set up a new business might be incompatible with continuing to serve the existing employer.

4 If an employer believes that an employee’s actions in pursuit of his ambition have so become incompatible, he owes the same duty not to dismiss unfairly as he would in any other type of case.”

I am satisfied that not only did the Complainant have ambitions to set up his own business, he did so. He never informed his employer and believed that he could continue to work with his employer while he also would be competing with it in a limited market. Accordingly, in the circumstances of the facts of this case I deem that it is my function as the adjudicator to decide whether the employer’s decision for dismissal was within the band of reasonableness of a reasonable employer or not. In this regard, I note the UK Court of Appeal of British Leyland UK Limited v Swift [1981] IRLR 91, where, Lord Denning stated:

“The correct test is: was it reasonable for the employers to dismiss him? If no reasonable employer would have dismissed him, then the dismissal was unfair. But if a reasonable employer might reasonably have dismissed him, then the dismissal was fair. It must be remembered that in all these cases, there is a band of reasonableness, within which one employer might reasonably take one view, another quite reasonably take a different view.

In her judgement in the Circuit Court case of Allied Irish Banks plc v Purcell [2012] 23 ELR 189, Ms Justice Linnane referred to the British Leyland case and remarked as follows: “It is clear that it is not for the EAT or this court to ask whether it would dismiss in the circumstances or substitute its view for the employer’s view but to ask was it reasonably open to the respondent to make the decision it made rather than necessarily the one the EAT or the court would have taken.”

In the within case the Respondent said that the decision to terminate the Complainant’s employment was entirely reasonable in all the circumstances of the facts. I agree with the Respondent and find that the facts presented in the case fall well within the boundaries of the band of reasonableness as discussed in the case law above.

Was the Process Fair?

The second question that I have to address is whether the Respondent’s process was fair. I have carefully captured the Respondent’s steps in relation to the investigation and processing of the matter above.

There was a substantial engagement from the Respondent. Mr. A was involved at an early stage in an attempt to resolve the matter locally and at an early stage. It was the clear that he was not getting the full assistance from the Complainant and it was only escalated at that point. Time and space and clarity from the Respondent’s side was evident throughout. I have no criticism of their approach or of the process it followed and deem that it acted with fairness and transparency throughout.

Having considered the evidence of all the parties, it is my view that the dismissal of the Complainant for opening a competing business was a breach of his contract. I also find that the process that the Respondent followed was fair and appropriate. I therefore find that the dismissal of the Complainant was fair in all respects.

Unfair Dismissals Acts - competing business – fair dismissal