A legal dispute between two television networks over a programming executive sends a warning to recruiters about the dangers of failing to check candidates’ contractual obligations before making job offers, says an employment law specialist.
The high-profile clash between the Ten and Seven networks began earlier this year, when Seven programming executive John Stephens signed a two-year contract with rival Ten.
The contract prevented Stephens from working with another entity in any capacity during the term of his employment, which he planned to start on June 9, following a three-month notice period.
Unknown to Ten, however, Seven’s wheels were already in motion to entice Stephens back, with the network offering him a new role the day after he signed the Ten contract, on a salary four times higher than his current earnings and significantly higher than the Ten offer.
Stephens backed out of the Ten contract on March 10, four days after signing; however Ten refused to accept the withdrawal and sought an injunction to prevent Stephens working with Seven, arguing the rival network had induced Stephens to breach the agreement.
NSW Supreme Court Justice James Stevenson found Stephens had not breached his contract because the restrictions only operated during his employment with Ten, which had not yet started.
He added, however: “Had I been satisfied that Mr Stephens acted in breach of the Ten Agreement, I would have concluded that Seven intentionally and knowingly induced that breach”.
“Through its senior executives, Seven set out to persuade Mr Stephens to change his mind and stay with Seven. Those senior executives made an extraordinarily generous financial offer to Mr Stephens which, I have found, they knew would more than match what Ten had offered… and which they intended would cause Mr Stephens to rethink his position,” he said.
While the job offer and persuasion from his colleagues weren’t the only matters that contributed to Stephens’ decision to back out of the contract, they were a significant factor, said Justice Stevenson.
“In my opinion, Mr Stephens would not have acted as he did, absent Seven’s conduct.”
What does this mean for recruiters?
FCB Group partner Jessica Fisher told Shortlist the case reinforces the importance of uncovering candidates’ existing contractual obligations, prior to making a job offer.
“Having non-poach and non-solicit clauses in senior contracts is almost de rigueur these days, but knowing the breadth of them and the length of them and all that sort of thing is important,” she said.
If, for example, a candidate’s contract includes a non-compete clause, this could delay their start date and affect their suitability for a role, she said.
“Even if it’s not a non-compete, but [the candidate still] can’t go and do certain things for a certain period of time, it may be that the recruiter’s client may find that candidate less attractive as they can’t be ‘off the lead and running’,” she said.
Recruiters should find out this information before an offer is made, and depending on the seniority of the role, it might even be appropriate to scope it out before sending them for an interview, added Fisher.
Repudiation claim could have legs
In the Seven v Ten case, Justice Stevenson noted that Stephens had repudiated his obligations under the employment agreement with Ten by reneging on the contract.
“Ten could have accepted that repudiation, rescinded the Ten Agreement and looked to Mr Stephens for damages, or such other relief as might then have been available,” he said.
It did not, however, pursue that course of action – most likely because it wanted to hold him to the agreement, said Justice Stevenson.
“The question of whether the Ten Agreement is ‘enforceable’ is one which, in the events that have now happened, will be best considered if and when Ten seeks to take further action under it.”
Fisher told Shortlist that if Ten pursues a claim over the repudiation of the contract, this might also have implications for Seven.
“[Ten] should be able to – if they can prove all that up – successfully sue him for damage that his behaviour, and potentially Seven’s as well in inducing him to do that breach or repudiation, has caused to Ten.”