In the recent case of Sunrise Brokers LLP v Michael William Rodgers [2014] EWHC 2633 (QB) the High Court granted a declaration to the claimant employer that the defendant remained in its employment, and therefore subject to restrictive covenants, for the whole of the period of his garden leave and for a reasonable period after his contract of employment had ended despite having stopped his pay.
Background
At the material time, Mr Rodgers was bound by a recent contract of employment dated 21 October 2011 which, although terminable by Sunrise on giving three months’ notice was not terminable by Mr Rodgers until the expiration of an initial period of 3 years and thereafter only by giving a further 12 months’ notice. The contract also stated that the notice should be given in writing.
In February/March 2014, Mr Rodgers was becoming dissatisfied and received an offer of alternative employment from a competitor. On 27 March 2014 he verbally informed a director of Sunrise that he was leaving Sunrise and wanted to leave immediately. He was told to go back to work and to make no final decision until his immediate supervisor was available. However, he then left the offices and went on a pre-planned holiday and did not return.
By the time he had had this conversation, he had in fact already signed an employment contract with his prospective new employers.
As a result of his failure to return to work from holiday, the HR department noted that he was on “unauthorised absence” and the company took a decision not to pay him for April 2014. The company’s solicitors wrote to inform him that he had not given appropriate notice (in writing) and that even if he had done so, his contract could not terminate before September 2015. Mr Rodgers argued that he had “summarily resigned” on 27 March 2014 but Sunrise indicated that they had never accepted any such resignation. They said that they were ready and willing to remunerate him in return for him attending work.
Eventually by way of compromise Sunrise agreed that it would treat an email from Mr Rodgers’ dated 16 April 2014 as the first written notice of resignation and would hold him to just 6 months’ notice from that date and waive its other contractual rights. Mr Rodgers’s lawyers then argued that the failure to pay him during April was a repudiatory breach. They indicated that he had accepted that breach and therefore argued that his employment was terminated with immediate effect from the date of their letter of 16 May 2014.
On the facts, the judge found that Sunrise had not accepted Mr Rodgers’ oral offer to resign in March, and decided that it was not a repudiatory breach for Sunrise to decide not to pay Mr Rodgers bearing in mind that he not turned up for work in April 2014.
As a result, the judge found that Sunrise was entitled to enforce the garden leave provisions within the contract and was also entitled to enforce the post-termination restrictions. In theory that would have given a total period for the restrictions of up to 12 months. However the judge took the view that a reasonable period would be 10 months on the basis that
there would normally have been a structured handover period of in between 2 and 6 months (an average of 4 months) in which a departing employee would have been expected to have ongoing client contact; and
- it would be reasonable for the employee to be prevented from having contact with clients during a period of at least 6 months from the last date of contact.
Summary
Garden leave can be enforced by an employer against an employee. If the employee chooses not to work during that period, the employer is entitled to refrain from paying him but can still enforce all other contract terms including restrictive covenants.