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Employment Law

Legal guidance - compliance - software

12 JAN 2015

Sunrise Brokers LLP v Rodgers [2014] EWCA Civ 1373

Daniel  Clarke

Barrister

Sunrise Brokers LLP v Rodgers [2014] EWCA Civ 1373
In Sunrise Brokers LLP v Rodgers the Court of Appeal has tackled “the interesting and difficult issue of whether, when an employee leaves his employment without giving proper notice stating that he will never return, the employer can keep the contract of employment alive, so as to be able to enforce the employee's obligation not to work for anyone else, while simultaneously refusing to pay the employee any wages on the basis that the employee is no longer ready and willing to work for the employer.” As the case illustrates, in appropriate circumstances, the employer can do just that.

Background

Mr Rodgers was an employee of Sunrise Brokers (“Sunrise”), working on its precious metals trading desk. He signed an employment contract in October 2011. He could only terminate this by giving 12 months' notice after 3 years, i.e. after September 2014. The contract also included post-termination restrictions and a requirement for him to inform his employer if he received offers of employment from elsewhere.

However, on 5 March 2014 Mr Rodgers signed an employment contract with a EOX (a competitor based in New York) starting in January 2015. He informed Sunrise on 27 March 2014 that he wanted to leave immediately. He did not mention the job offer. Sunrise informed him that he could not give notice before September 2014. He was told to return to work. Mr Rodgers failed to return to work. Sunrise stopped paying his salary. They then issued proceedings in the High Court, seeking a declaration that Mr Rodgers was still an employee and an injunction preventing him working elsewhere.

The High Court (Richard Salter QC) held that, following the Supreme Court decision in Société Générale v Geys [2012] UKSC 63, Sunrise was entitled to choose whether or not to accept the resignation in breach of contract. Further, it was entitled not to pay Mr Rodgers' salary when he did not work and to be granted an injunction upholding the terms of the contract until 16 October 2014 (the date on which he had been offered an early release from the contract) and preventing him from breaching his restrictive covenants until 26 January 2015.

Mr Rodgers appealed, contending that the Judge had erred in granting an injunction to restrain the him from working in competition with Sunrise until after the expiry of his notice period on 16 October 2014 in the absence of any undertaking by Sunrise to pay his salary and provide other contractual benefits.

Decision

The Court of Appeal (Longmore, Gloster, Underhill LJJ) dismissed the appeal. The Court accepted that it was common practice for the employer in such circumstances to give or volunteer an undertaking that the employee would be paid. The rationale for such an undertaking lay in the rule that the court would not directly or indirectly compel an employee to return to work for his employer. However whether an injunction will actually compel an employee to return to work is a question of fact. There was no rule requiring the employer to give an undertaking as to remuneration which went beyond their obligations under the contract, in order that they should be entitled to obtain an injunction.

In the present case, the judge had been entitled to find that the injunction would not compel Mr Rodgers to return to work. Despite living off savings, Mr Rodgers' financial situation did not demonstrate compulsion. Importantly, Mr Rodgers had voluntarily agreed to 6 months' restraint following termination, during which he could not expect to be paid. He would have suffered the same period of “idleness” under the agreed post-termination restrictions. The same point applied to any “atrophy of skills” he would suffer.

Comment

The decision clarifies that when an employee resigns with immediate effect, in breach of contractual notice provisions, an employer can choose to keep the contract alive. It cannot be forced to put the employee on gardening leave. The employer may not be in breach of contract if it refuses to pay wages during the notice period. Further, it is not a condition of injunctive relief to enforce a notice period that an employer give an undertaking to pay wages. Accordingly, an employee could find themselves for a time neither allowed to work for a competitor nor entitled to wages from their current employer.
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