Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

In the case of Nosworthy v Instinctif Partners Limited EAT/0100/18/RN, the Employment Appeal Tribunal (the ‘EAT”) held that the Employment Tribunal (the ‘ET’) had been correct in dismissing the claims made by an employee who had lost the right to receive cash payment, loan notes and new shares in her employer when she voluntarily resigned from her employer.

The Facts in Nosworthy v Instinctif Partners Limited

Miss Nosworthy (the ‘Claimant’) was given a 2% shareholding in her employer, Communications Operations Limited, which was then sold with the rest of the company’s shares when it was acquired by Instinctif Partners (the ‘Respondent’). As a result, the Claimant was entitled to deferred payment for part of her shares under a three year ‘earn-out’ scheme in the Share Purchase Agreement which provided for her to receive cash payments, loan notes and new shares in the Respondent.

These arrangements served as a mechanism by the Respondent to incentivise retention of key employees. Bad leaver provisions meant the Claimant received £143 for her shares and forfeited loan notes when she voluntarily resigned in 2016 as she lost their entitlement to earn-out payments and had to sell her loan notes and new shares back to the Respondent at their acquisition cost.

The decision of the Employment Tribunal

The Claimant brought a claim in the Employment Tribunal and challenged the bad leaver provisions on three grounds:

  1. that they were “unconscionable” and therefore unenforceable
  2. that they amounted to an unlawful penalty clause
  3. that they amounted to an unlawful deduction from her wage

All arguments raised by the Claimant were rejected by the Employment Tribunal and she went on to appeal the decision in the Employment Appeal Tribunal.

The decision of the Employment Appeal Tribunal

Unconscionable Bargain

Here the EAT reminded itself that this required that “one party has to have been disadvantaged in some relevant way as regards the other party, that other party must have exploited that disadvantage in some morally culpable manner, and the resulting transaction must be overreaching and oppressive”. It held that there was no evidence of serious disadvantage whether through poverty, or ignorance or lack of advice (the Claimant had confirmed she had received legal advice on the agreement at the time of entering into them).  The first ground of appeal therefore failed.

Unlawful Penalty Clause

The EAT was also unconvinced by the argument that such provisions were an unlawful penalty clause. A penalty clause relates to damages for breach of contract which are purely a deterrent against a breach rather than a genuine pre-estimate of loss. Penalty clauses are generally unenforceable.  Thus, a penalty has to operate on a breach of contract.  The investment agreement, to which the Claimant was a party, contained a covenant that she would not become a bad leaver (as defined in the Articles of Association). Whilst it was acknowledged that the Claimant had breached the investment agreement, the Respondent was not relying on this breach to enforce the bad leaver provisions; it was simply applying the standalone rules set out in its Articles of Association. Therefore, the issue of penalties was not relevant in this case.

Unlawful Deduction from Wages

Finally, the EAT held that this could not amount to an unlawful deduction from wages under section 27(2)(e) of the Employment Rights Act 1996.  Whilst the claim in respect of earn-out shares and loan notes could be said to be payable in connection with employment, they were deferred consideration for the sale of her shares and therefore provided to the Claimant as a vendor of shares, not in her capacity as a worker.

Our solicitors’ views on the case of Nosworthy v Instinctif Partners Limited UKEAT/0100/18/RN

Sacha Barrett, a Senior Associate in the employment department at Redmans, made the following comments on the case: “This case highlights the importance of employees taking legal advice prior to entering into a share scheme as widely drafted bad leaver provisions can be enforceable.’

The decision of the Employment Appeal Tribunal in UKEAT/0100/18/RN can be found here.


Redmans Employment Team deal with employment matters for both employers and employees, including drafting employment contracts and policies, advising employers and employees on compromise agreements, handling day-to-day HR issues, advising on restructures, and handling Employment Tribunal cases for both employers and employees Call 020 3397 3603 to speak to one of the members of our employment team or email us on enquiries@redmans.co.uk. Redmans have offices in Richmond, Chiswick, Hammersmith, Fulham, Kingston, Wimbledon, Ealing, Kings Cross and Marylebone (meetings strictly by appointment only).

Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Share →

Our awards

Request a callback

    Your first name (required)

    Your last name (required)

    Your email (required)

    Your telephone number (required)

    Brief details of your enquiry

    Contact us

    Please feel free to discuss your own position and concerns. Contact your nearest office on:

    T: 020 3397 3603
    E: enquiries@redmans.co.uk
    W: www.redmans.co.uk


    4.76 Average

    235 Reviews

    Paul O

    Chris & Rana guided me through a redundancy discussion. Prompt & patient assistance with the documents & meetings. Clear advice & fast responses regarding negotiations. Would definitely recommend & would use again without hesitation.

    Posted 1 month ago


    Outstanding, efficient service. Thank you so much!

    Posted 1 month ago

    Jaswant S

    Very very happy with the good service I got Thank you so much for your help

    Posted 1 month ago


    Mel and Chris were fantastic and supportive throughout! 1000% recommend.

    Posted 1 month ago

    Emma D

    Good responsive service

    Posted 1 month ago

    Mike T

    Good efficient service.

    Posted 1 month ago

    Brenda G

    Very professional and helpful

    Posted 1 month ago

    Charles A

    Chris Hadrill was recommended to me when I found myself in need of a solicitor at very short notice. He contacted me almost immediately to arrange a call. Chris handled my case in a professional and timely manner and kept me notified throughout. Chris inspired confidence and made me feel I was being cared for. If ever I'm in need of legal representation, I would not hesitate to contact Chris. And will gladly recommend him to family and friends.

    Posted 1 month ago

    Rosalind R

    I was very happy with the service that I received from Redmans Solicitors. They were able to advise me accordingly with regards to my employment matter and stay within the agreed costing.

    Posted 1 month ago

    Karl B

    Caroline and Chris were so helpful and friendly. Couldn't of asked for a better service.

    Posted 1 month ago

    Dimitrios P

    Excellent, professional service, in time and within the expected value.

    Posted 1 month ago

    Barbara K

    Everything quickly and fairly. Very professional. Thank you.

    Posted 1 month ago

    Sabrina J

    I received a efficient professional service during the whole process of liasing between myself and my former employer to getting all forms signed and receiving my redundancy payment in full in the summer of this year.

    Posted 1 month ago


    I received legal advice on a redundancy settlement agreement from Redmans Solicitors and was very impressed by the quality of their service. Chris Hadrill is highly experienced in settlement matters and was especially understanding of the particulars of my case, going out of his way to ensure that it was resolved quickly and with the utmost professionalism. I have no hesitation in recommending Redmans to anyone in need of employment advice and settlement resolution.

    Posted 1 month ago


    Excellent service, with full explanations of everything needed. Both Chris and Mel answered all emails very promptly and were personable and efficient.

    Posted 1 month ago


    I would like to thank Chris Hadrill, in particular who handled my case, for all his hard work, expertise and dedication. He listened with empathy and offered suitable advice, which made me feel valued and confident through a difficult time. I would highly recommend Chris and the team at Redmans Solicitors. Thank you.

    Posted 1 month ago

    Yann G

    Yann Guezennec / Chris Hadrill - Thanks for the detailed, informed and professional advice for my settlement. When comprise is the rule I felt we could have been maybe a bit more aggressive from the start. However an acceptable outcome considering the situation. Thank you

    Posted 1 month ago

    Valentina D

    Great service from Mel, she was very good at explaining every part of the settlement agreement and very efficient dealing with the HR team. Very professional team, I would definitely use them again in future if the opportunity came up.

    Posted 2 months ago

    Olaf S

    I was very happy with the service that I have received. Thank You Regards

    Posted 2 months ago

    Rebecca A

    I had a wonderful solicitor called Caroline who was so helpful and gave me all the information I need and explained everything in detail so I was crystal clear. Would highly recommend if you are in need of a solicitor!

    Posted 2 months ago

    Gareth J

    Very efficient, helpful and pragmatic support from Caroline. Happy to work with my requirements / suggestions but also made some very good points which helped to achieve a higher settlement amount. Would highly recommend Caroline and Chris.

    Posted 2 months ago