UK: contractual power to change an executive director's role or responsibilities must be exercised rationally and for the purposes of good management

Employers should bear in mind that improperly exercising a unilateral contractual right to change an employee's role or responsibilities or appoint someone to act jointly with them could amount to a repudiatory breach.

The High Court in McCormack v Medivet Group Ltd held that such a term in relation to the Director of Clinical Operations was subject to the implied term that it must be exercised honestly, rationally and for the purposes for which the power was conferred, namely in the interests of good management. 

A new CEO had been appointed and very quickly formed a view that the claimant had too many responsibilities and was performing poorly;  soon after he decided to re-organise the management structure and create two new roles, giving her the role of Chief Clinical Officer and allocating some of her previous responsibilities to the new Chief Operating Officer. 

The Court held that the CEO’s decision was irrational, since it had been taken on an ad hoc basis, without proper consideration of the necessary structural adjustments or any meaningful assessment as to how the claimant's interim and final responsibilities should be allocated.  The claimant's performance had been satisfactory before the new CEO arrived and he had had very little time to evaluate her performance before reaching his decision.  He had failed to consult with the claimant and his decision had been premeditated.

The decision therefore gave rise to a repudiatory breach which the claimant accepted by terminating the contract, entitling her to damages for breach of contract.