An employee cannot ‘walk out’ and refuse to work to avoid their notice period and the restrictive covenants contained in their contract of employment.
In Sunrise Brokers LLP v Rodgers [2014] EWHC 2633 the High Court held that an employer does not have to accept that a ‘walk out’ by an employee will terminate the contractual relationship. The employer has the option to accept the employee’s repudiatory breach or to affirm the contract. In addition, although a court cannot order an employee to work, it can grant an injunction ordering an employee to observe the other terms of his contract during his notice period and his post-termination restrictive covenants.
Background
Mr Rodgers was employed by Sunrise on a fixed term contract until 22 September 2014, terminable on 12 months’ notice. His contract contained a valid set of restrictive covenants.
At the beginning of March 2014 Mr Rodgers signed another contract with a competitor to commence work on 1 January 2015. On 27 March 2014 Mr Rodgers told Sunrise that he was leaving immediately, which he confirmed in writing in April 2014. Sunrise stopped paying him at the end of March 2014 and confirmed payment would recommence if he returned to work.
Decision
Following Mr Rodgers’ resignation with immediate effect, Sunrise had the option to accept his repudiatory breach or to affirm the contract. The Court ruled Sunrise did not lose its right to affirm the contract by its decision to cease payment to Mr Rodgers who refused to work, as the employee must be ready and willing to work in exchange for wages and vice versa. Failure of either of these mutual obligations did not mean the contract ceased to exist. In effect, only one obligation (pay) is suspended until the other obligation (work) is performed.
Mr Rodgers was not entitled to payment irrespective of work, as the price of the restrictions and other terms to which he was bound under his contract (analogous to garden leave). His entitlement to payment depended on his readiness and willingness to work. It was held Mr Rodgers remained employed until 16 October 2014 (a reduced notice period offered by Sunrise).
The Court agreed that it was forbidden to enforce the terms of Mr Rodgers’ contract, if this would compel Mr Rodgers into “forced labour”. However, it was appropriate to grant an injunction ordering Mr Rodgers to observe the other terms of his contract (e.g. not working for a competitor and not contacting his former clients), until 16 October 2014.
The post-termination restrictive covenants were reasonable when entered into and could be enforced. Given the fact the contract indicated that the maximum period of restraint required by Sunrise was 6 months from the last client contact and that an employee would usually spend approximately 4 months handing over his/her job, the Court concluded it would be reasonable to enforce the post-termination covenants for 10 months from the last client contact. Therefore, it was held that the restrictive covenants would be upheld until 26 January 2015.
“Take-aways”
- Although the courts cannot force an employee to work, they are willing to grant an order requiring an employee to comply with the other terms of his contract, therefore it is essential to have a well drafted and up to date employment contract.
- During garden leave an employee is entitled to receive pay whilst being asked not to work by the employer but the same does not apply where the employee refuses to work. An employee cannot demand that he/she is put on garden leave. It is the employer’s choice.
- Employers should carefully consider the short and long term impacts of an employee resigning in breach of contract and seek legal advice on immediate actions to be taken. Beyond the restrictive covenant issues, the business may also want to consider how to safeguard confidential information, trade secrets and client contacts.