Injunction forcing employee to remain employed without pay upheld by Court of Appeal
The Court of Appeal has upheld a High Court decision to grant an injunction to an employer, the effect of which was to require the employee (who had sought to leave in breach of contract) to remain employed without pay for a period of ten months.
In Sunrise Brokers LLP v Rodgers, R’s contract prevented him from resigning before September 2014, after which point he could resign by giving 12 months’ notice. His contract also contained post termination restrictions and a garden leave clause. On 27 March 2014, he purported to resign with immediate effect. He had secured a job with a competitor and intended to relocate to the USA. His employer refused to accept his resignation and required him to come into work. When he refused it did not pay him.
Various exchanges took place between solicitors for both parties, during the course of which the employer offered to accept R’s contract as coming to an end with effect from 16 October 2014. When this was not agreed, it sought a declaration that R was still employed, an injunction requiring him to observe the terms of his contract and an order restraining him from working elsewhere.
The High Court held that the employment contract continued until 16 October. R’s purported resignation was a repudiatory breach of contract. The employer had chosen not to accept the breach and he therefore remained employed. It rejected R’s argument that the decision not to pay him was a repudiatory breach by the employer. There was no contractual obligation to pay him if he was not ready and willing to work.
The Court granted an injunction requiring R to observe the terms of the contract (but not perform work) until 16 October 2014. During this time he was not to work for any competitor, nor contact any clients. It took into account the fact that he had already agreed not to work for anyone else until September 2014 and that his contract with his new employer would not start until January 2015. The post termination restrictions were also upheld (but for a shorter period than in the contract) until 26 January 2015.
R appealed to the Court of Appeal, arguing that the High Court should not have granted an injunction in the absence of an undertaking from the employer to pay his salary whilst his employment continued. He also argued that the period of ten months was too long, as the contract only provided for a six month post termination restriction.
The Court of Appeal rejected his appeal. An injunction should not be granted if the effect is to compel an employee to work for the employer. This is why it is common practice for employers to offer to pay the employee throughout the injunction period. However, it will not always be the case that non-payment will result in an employee being compelled to work for their employer. The High Court had been entitled to find that this would not be the effect here. R had agreed a contractual start date with his new employer of January 2015, which gave the impression he could cope until then without pay. In addition, he had told his employer that he could not relocate in time to start work with his new employer before October 2014 in any event. It was also relevant that R had agreed to a six month post termination restriction during which there was no question of him being paid.
The Court of Appeal also rejected the argument that the length of the post termination non-compete restriction was relevant when assessing the non-payment period.
This case demonstrates that if an employee resigns without notice, employers can opt to hold them to the terms of their contract, rather than accepting their resignation. In addition, if the employee refuses to work they may not have to pay him. The facts of this case were slightly unusual as the employee needed time to relocate and had delayed his start date with his new employer. This indicated that he was able to cope without pay for a period of time, which was evidence that the effect of the injunction was not to compel him to work for his employer. However, the other factor taken into in to account by the Court of Appeal, the existence of a non-compete restraint, will be much more commonplace. Whether this will be enough evidence on its own remains to be seen.
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