Stigma Damages and the News of the World

01/08/2011

By Nick Hobden, Partner and Head of Employment. First published in People Management in August.

No doubt we have all reacted with a mixture of interest, surprise and indeed shock at reports of the tactics employed by News of the World journalists in the pursuit of a story.  But many were equally surprised by News International’s abrupt decision to close the paper down.   In one fell swoop, over 200 people have seemingly lost their jobs.  Which begs the question: where does this leave them, legally speaking?

Of course, there are issues about News International’s obligations to collectively consult in relation to such a large scale business closure.  There is also the small matter of whether the dismissals have been conducted fairly.  Some may even speculate as to whether TUPE might apply to this situation, if the rumours about the launch of the ‘Sun on Sunday’ are true.  But what of the possibility that News of the World journalists might find it difficult, if not impossible, to secure employment in the media industry as a result of their association with a now tarnished brand?

Some may recall the collapse of the Bank of Credit and Commerce International (BCCI) in the early 1990s.  As a result of highly questionable practices within the bank and the negative publicity that followed, former BCCI employees were concerned about their employability.  Before the House of Lords, those employees sought to argue that if an employer acts in a dishonest and corrupt manner, then such conduct could amount to a breach of the implied term of trust and confidence.  The employees also argued that if such breaches adversely affected their career prospects, they ought to be able to claim appropriate compensation.

Normally, an employee might respond to an employer’s breach of contract by resigning and claiming that they have been constructively dismissed.  The value of any claim for breach of contract in such situations would typically be limited to compensation for the applicable notice period.  This may do little to address the losses suffered by employees who cannot secure employment because of the conduct of their former employer.  So in a break from the previous legal authorities, the then House of Lords decided that in such circumstances, it was possible for an employee to claim compensation for the ongoing losses suffered as a result of the stigma attached to working for such a severely discredited employer. 

Cases in which ‘stigma’ damages are recoverable are few and far between.  But it might just be possible for NOTW employees to make this argument.  Time will tell whether such claims prove necessary, or whether News International has further tricks up its sleeve.