Restrictive Covenants, Notice Period and Salary
01 August 2014
The High Court has ruled on whether an employee can be restrained from working for a competitor during his notice period (and the period covered by his restrictive covenants) where the employer stops paying his salary.
The High Court considered this question in the case of Sunrise Brokers LLP v Michael Rodgers, and we are grateful to Daniel Barnett for providing this summary:
In March 2014, Mr Rodgers left Sunrise, having accepted a position with a competitor commencing in January 2015. His contract contained a 12 months' notice provision and enforceable restrictive covenants. The contract also provided for garden leave (at Sunrise's discretion which was not exercised) for a period which would not normally exceed 6 months.
From April 2014, due to his unauthorised absence, Sunrise ceased to pay Mr Rodgers' salary but confirmed that payments would recommence on his return to work. Mr Rodgers claimed that non-payment of salary was a bar to affirming the contract, which was not accepted.
The Court held Sunrise had good reason to keep the contract alive and granted an injunction to prevent Mr Rodgers working for a competitor during a reduced notice period agreed by Sunrise, deciding that this would not force Mr Rodgers to return to work for Sunrise. The Court allowed a post-termination restriction of 10 months from the last client contact. This still meant a shorter overall period of restraint than had Mr Rodgers abided by the terms of his contract.
While the courts are not prepared to order specific performance of an employment contract, the decision affirms they will not permit a wrongdoing employee to disregard protection of the employer's legitimate business interests.