During a corporate crisis, obscure little snippets of employment law often surface. It appears that employees of a company which falls into disrepute can claim for damages to their reputations. As the Lawyer explains:
The case-law is clear. If senior employees systematically carry on dishonest operations within what is otherwise a lawful and legitimate business, their conduct may amount to a fundamental breach of all employees’ contracts and thus give rise to claims for damages.
The legal precedent was set by two employees of Bank of Credit and Commerce International (BCCI), a bank which was shut down by regulators in the early 1990s for running fraudulent operations. The appellants argued, successfully, that their association with BCCI had prevented them from getting jobs after the bank collapsed.
The Lawyer reckons News of the World staff could make a similar case:
If the allegations of widespread wrongdoing at the NotW are proven in the inquiries, criminal and civil cases to follow, employees may assert that the NotW has conducted a dishonest and corrupt business and claim damages if the stigma of that corruption blights their attempts to seek new employment. For NotW’s part, it will want to head off any such claims by, among other things, taking steps at an early stage to mitigate any risk of stigma to former employees.
By the same logic, if the contagion spreads to the whole of News International, might other employees in the group be afflicted with a similar blight? After all, as I said yesterday, while the phone hacking was carried out by the News of the World, the attempt to cover it up was a News International operation. There is now compelling evidence that the company’s senior management were aware of the illegal activities in 2007, yet they chose to deny them and buy the silence of those involved.
Once the details of News International’s activities are revealed, its reputation may sink nearly as low as that of BCCI. Lawyers Silverman Sherliker are already on the case for the former News of the World staff. This could get very interesting.
Update: But, as Darren Newman points out, News International probably doesn’t give a toss about employment law anyway. Any payments can come out of petty cash.