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Preparing for changes to non-disclosure agreements from 1 October 2025
Andy Norris
Employment law varies significantly across Europe, particularly concerning the engagement and termination of managing directors. Practices range from engaging self-employed managing directors under service agreements to hiring them as direct employees.
A useful summary from Delphi has been jointly produced by 33 employment lawyers working in various European countries. This information is valuable for planning engagements or terminations of managing directors in different European countries. Andreas White and Clodagh Hogan's full summary can be seen below from a UK perspective.
Please note that the information is limited to a high-level overview of the employment-law landscape and does not deal with company law or corporate governance considerations.
Service agreement, consultancy agreement or employment contract?
MDs tend to be executive (as opposed to non-executive) directors and, therefore, employees employed under an employment contract (confusingly referred to as a “service agreement” in practice).
Is there a need to have a valid reason for terminating a managing director?
As a general rule, yes. If the MD has at least two years’ continuous employment, they are protected from unfair dismissal. This means that the employer must have a fair reason to dismiss (there are five potentially fair reasons) and a fair process must be followed in carrying out the dismissal.
Even if the MD has fewer than two years’ continuous employment, it is advisable to carefully consider the reason for termination and the procedure to adopt, as MDs are protected under anti-discrimination and whistleblowing legislation from the outset of employment. Failure to provide a valid reason for termination may, depending on the circumstances, increase exposure to potential claims under these laws. These claims are also more valuable to an MD than an unfair dismissal claim as such claims are not subject to a cap on the amount of compensation which can be awarded.
There are also a number of circumstances in which dismissals will be deemed “automatically unfair,” where the reason or principal reason for dismissal is one of a number of reasons proscribed by statute (an inadmissible reason). There is no minimum length of service requirement in respect of these claims.
Is severance payment mandatory?
No. Whereas the employer is almost always required to provide notice of termination or payment in lieu of notice (often three or six months in practice) additional severance pay is not required unless this is provided for in the MD’s service agreement, which is relatively rare.
However, it is not unusual for a severance payment to be made to a departing MD in return for them entering into a settlement agreement on departure settling all actual and potential claims the MD may have arising out of their employment or its termination.
Anything else to observe?
It is important to comply with the terms of the MD’s employment contract in terminating their employment, not only to avoid a breach of contract or wrongful dismissal claim, but because failure to do so would result in any post-termination restrictions within the contract (non-competition provisions, for example) falling away.
Depending on the sector, there may also be regulatory obligations to consider in the termination of an MD.
You can read the full summary from Delphi here.
Further information
If you have any questions or concerns about the topics raised in this blog, please contact Andreas White or Clodagh Hogan.
About the author
Andreas White is a partner in our employment team. He has substantial litigation experience, with a particular focus on complex and high value employment and partnership disputes.
Clodagh Hogan advises both companies and individuals on all aspects of employment law, in particular on how to manage and resolve the difficult employment problems that can arise in the workplace.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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