Keeping the employment contract alive when employees abandon ship

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Keeping the employment contract alive when employees abandon ship

22 Aug 2014

Receiving news that an employee will be leaving the company can be stressful for an employer, not least because of the additional recruitment and training pressures that often accompany it. However, these pressures can increase if the employee leaves without giving appropriate notice, or to go to work for a competitor, despite restrictive covenants in their contract. Here, Kuit’s employment department uses a recent High Court case to highlight an employer’s rights in such circumstances – and what they can do to avoid the issue in the first place.

In Sunrise Brokers LLP v Rodgers [2014], the High Court considered the obligations on an employee who leaves his employment without notice in breach of contract.

An employee had walked out of Sunrise Brokers LLP without giving notice, having already accepted employment with a competitor.

While they had submitted a written notice, it was insufficient to cover the twelve-month notice period their contract required.

Sunrise agreed to allow the employee six months’ notice, but insisted that they were then subject to covenants of six months’ duration, which prevented them from working for a competitor.

Following the walk-out, Sunrise refused to pay the employee their salary, whilst also maintaining that their contract and its restrictive covenants were still in force. Sunrise applied for and obtained an interim injunction requiring the employee to observe the terms of their employment contract until the agreed date.

The High Court has now upheld this interim judgment, stating that the person was still an employee of Sunrise and bound by a notice period, whilst having no right to garden leave (for which they would have been paid and which would have reduced the time on their restrictive covenants). On the contrary, given that they were not willing and ready to work, the Court held that Sunrise was within its rights to refuse them payment of their salary.

“In this case,” says Uri Pawlowski of Kuits’ employment team, “the employer sought a declaration that they could keep the contract of employment alive and enforce the employee’s obligation not to work for anyone else, while simultaneously refusing to pay the employee wages on the basis that he is not ready and willing to work.

“This decision highlights the importance of having well-drafted notice provisions and restrictive covenants in employment contracts to resist approaches for staff from competitors. Robust provisions will deter employees from attempting to curtail their contractual obligations by refusing to work.

“For extra protection, an explicit ‘no work, no pay’ clause could be drafted in to your contracts of employment whereby employees who refuse to work are not entitled to pay and that refusal of payment does not amount to a breach of contract.

“Employees giving notice in such circumstances and then failing to turn up for work are not entitled to payment and must adhere to any notice and covenant clauses, whilst the right to garden leave is solely at the employer’s discretion.”

For more information about employment contracts, please contact us.

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