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Employees are to be held to period of notice and post-termination restrictions, High Court rules

Employment practitioners say Sunrise Brokers v Rodgers clarifies basic principle of 'no work, no pay'

1 August 2014

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The High Court has ruled against an employee who, having been hired by a competing firm, walked out of his employment and refused to work his notice period. The judgment has been hailed a common sense victory for employers across the UK.

Derivatives broker, Sunrise Brokers, brought the claim against Michael Rodgers, who left the business in March 2014 after he accepted a position with a competing USA-based business, despite being subject to notice and post-termination restrictions.

Ignoring the fact that he was subject to a fixed term contract to end on 22 September 2014, followed by a 12 months' notice period, Rodgers submitted his written notice on 16 April. Sunrise agreed to reduce his notice to six months followed by a further six month restrictive covenant which, as per his agreed contract, barred him from working for a competitor company.

Sunrise ceased to pay Rodgers' salary after he failed to return to work and sought an injunction which would hold Rodgers to a period of notice and bind him to his restrictive covenants.

Rodgers accepted that his employer had not forced him to resign and, although, his contract contained a garden leave clause, this was only to be exercised at his employer's discretion and not by his demand.

In court, Sunrise argued that period of notice and the restrictions that applied after the employment ended were in place for a good reason and should be honoured. If Rodgers returned to work, the company had agreed that he would be paid as usual. However, he would not be paid if he failed to turn up.

The High Court ruled that Rodgers was still employed by Sunrise, that he was bound by a period of notice and that he was not entitled to convert this period into garden leave. Furthermore, Sunrise's decision to cease paying Rodgers' salary did not amount to a breach of contract. Rodgers was, therefore, held to a period of notice and post-termination restrictions.

David Greenhalgh, the managing partner of Twenty Twenty Law, who acted for Sunrise, said: "This is an important victory for UK employers and for common sense; employees who simply don't turn up for work having given notice in these circumstances should not get paid. It is not for the employee to demand to be put on garden leave as this is a power reserved to the employer."

He continued: "Businesses are entitled to protect themselves from attack by competitors who try to poach their staff and clients. What this case highlights is the importance of having proper foundations in place to defend attacks from competitions, in the form of well-drafted employment contracts documentation."

'No work, no pay'

Kevin Poulter is the editor at large of Solicitors Journal and senior associate specialising in employment at Bircham Dyson Bell

"This case clarifies the basic principle of 'no work, no pay'. It is a fundamental part of any employment relationship. In this case, the employee refused to make himself available to work, as the employer requested, or to perform any period of handover. Further, Sunrise declined to accept Rodgers' resignation or that it had breached his contract by refusing to pay his salary.

"To accept a breach of contract would have had the consequence of releasing Rodgers from what we must presume were valuable restrictions on his future medium term employment and to protect Sunrise's confidential information. The fact that Rodgers had already entered into a new contract of employment with a competitor - even though that employment had not commenced - may have given the court greater cause for concern, at least at the interim stage. "The second point of interest is that the Court chose to vary the contractual terms. By using its discretion to reduce the period of restriction from 12 months to six months, the path may have been set for future decisions which vary the contractual term of restriction or the applicability of any similar restriction.

"This case is a simple warning to employees and a timely reminder of the importance of a well-drafted contract, well thought through and reasonably applied restrictions, and that advice should be sought not only at the end of an employment relationship, but before commencement too."

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