Out-Law / Your Daily Need-To-Know

Employers can refuse to pay staff and prevent them working elsewhere when they leave in breach of contract, rules High Court

07 Aug 2014, 2:50 pm

Businesses can prevent employees who resign from working for other companies during their notice period, and during the period that other post-termination restrictive covenants apply, without having to pay them during their notice period, according to a High Court ruling.

Parties to a contract are allowed to break out of that contractual agreement when the other party fundamentally breaches the terms of the contract. Such a breach is often referred to as a repudiatory breach of contract.

Richard Salter QC, sitting as a deputy High Court judge, ruled that Michael William Rodgers had breached the terms of his contract of employment with derivatives brokers Sunrise Brokers (Sunrise) when he offered his resignation, and stopped working for the company altogether, in April 2014, despite his resignation not being accepted and his notice period not being served. Sunrise stopped paying Rodgers in April.

Rodgers resigned after signing an employment contract with rival company EOX in March, which is due to commence on 1 January 2015.

The judge said Rodgers had been "entirely selfish" and had acted with "cynical disregard for his contractual obligations". He said he would issue an injunction barring Rodgers from beginning work for EOX or any other "similar competitor firm to Sunrise" until 16 October.

The court said they would issue the order after determining that Rodgers "still remains employed by Sunrise" and would continue to do so "until the reduced period of notice to which Sunrise has voluntarily agreed expires on 16 October 2014". Sunrise's refusal to pay Rodgers since April was not "an acceptance of his repudiatory breach", which would have meant Rodgers was freed from his contractual obligations, he ruled.

"Sunrise has not put Rodgers on 'garden leave'," the judge said. "Rodgers has simply absented himself from work. It is, however, implicit in my order that, should Rodgers (contrary to his settled and stated intention) in fact choose to return to work out his notice with Sunrise, Sunrise must keep its promise to pay him in accordance with the contract terms."

A number of further "post-termination restrictions" on what Rodgers can do following the end of his employment with Sunrise on 16 October will also be enforced until 26 January 2015 under a court order, he said.