Friday 24 October 2014

Injunctions during notice period

Thanks to Grahame Anderson of Littleton Chambers for preparing this case summary
Thanks to Laurie Anstis of Boyes Turner, who is standing in for Daniel Barnett this month.

Where a departing employee expresses unwillingness to work out the life of his contract (as distinct from post-termination restrictions) and the employer does not, therefore, continue to pay him, is the employee entitled to treat the contract as at an end such that injunctive relief to enforce the duty of loyalty may not be granted?

No, held the Court of Appeal (Underhill, Longmore and Gloster LJJ) in Sunrise Brokers LLP v Rodgers.

The employer was an inter-dealer broker; the employee was a derivatives broker. Midway through the life of his employment contract, the employee informed the employer that he wanted to leave immediately and would not continue to work. That is what he did. The employer stopped paying him.

The contract was terminable on 12 months' notice from him and contained provision for Garden Leave and post-termination restrictions.

On appeal it was accepted that:

(1) The employer was entitled to elect whether or not to accept the employee's repudiation, or to keep the contract alive. Since it chose to keep it alive, the employee remained an employee for the remaining period of his contract.

(2) Since an employee's right to remuneration depended on his being willing to work, the employee was not entitled to terminate the contract because of failure to pay.

The Court of Appeal rejected the grounds of appeal before it. They all went to the Judge's discretion to grant injunctive relief. Two key points are:

(1) It declined to go behind the Judge's finding that it was not demonstrated before him that the failure to pay would mean that the employee was, in reality, compelled to return to work for the employer or face "idleness and starvation". Employees must lead cogent evidence to this effect.

(2) The employee argued that the presence of a set-off clause between the Garden Leave clause and post-termination restrictions meant that the employer only needed 6 months of protection. As a matter of fact, the employee had had no client contact (etc) for more than 6 months. It was entitled to no further protection. The Court of Appeal decided that the Judge was entitled to have regard to what would have happened if the employee had in fact given the notice required under his contract.

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