The Argument Against Pulling a "Greg Smith"

Following his recent op-ed in the New York Times, Greg Smith has won praise for speaking out against some of the more unsavory practices at Goldman Sachs. His letter to his former employer has gone viral and the press are having a field day. Other employees who have similar gripes will doubtless be inspired, but beware: there are legal consequences to badmouthing your employer.

Different rules will apply depending upon whether you’re still employed at the time of the badmouthing. If you are still in employment, you will be bound by the implied term in your contract of employment of mutual trust and confidence that underpins every employment relationship, together with a similar implied term not to bring your employer into disrepute. You will also be bound by policies that are likely to be in place to stop you blogging adversely about your employer on social networking sites, whether in or out of office hours. Any breach of such terms or policies may give rise to disciplinary proceedings against you; in extreme cases, it can amount to gross misconduct.

Employment tribunals are starting to get to grips with the use of social media sites, and in the past few months, they have upheld a number of dismissals against employees for gross misconduct relating to blogging about work. An employee of Apple was recently dismissed for saying some particularly negative things about the company’s products on Facebook. Apple had a very clear social media policy prohibiting employees from making critical comments about its brand on social media sites, which undoubtedly helped the company win the tribunal case.

If you badmouth your employer after you’ve ceased employment, the law will view you differently. Greg Smith had already resigned from Goldman Sachs before he sent his missive. If you have already left employment, you will no longer be bound in the same way as you were while employed. But there are still traps for the unwary. You may have signed a compromise agreement (expected to be renamed “settlement agreement” from April 2012) and there will invariably be a clause in the agreement preventing you from making disparaging comments about your employer after you have left. Any such breach here can land you with a claim for damages.

You will also continue to be bound by the confidentiality clauses in your contract of employment, which usually govern disclosing such matters as details of clients, investors, funds strategies, etc.

So how did Greg Smith get away with it? First of all, he resigned and therefore would not have signed a compromise agreement. He also used his letter to dwell upon personal experiences of working at Goldman Sachs and personal thoughts. There was no disclosure of confidential business secrets, and breaches of trust and confidence as an employee were no longer an issue. He carefully navigated around what could otherwise have been a tricky position.

If you’re tempted to follow suit, tread carefully. Don’t forget the practical considerations: any other bank is unlikely to hire you. And what about your reference? I cannot see Goldman referring to Greg Smith favorably.

Philip Landau is an employment lawyer at Landau Zeffertt Weir solicitors.