Stay at Home

SG & R Valuation Service Co and Boudrais

Employers sometimes invoke “garden leave” clauses requiring an employee to stay at home during their notice period. But what happens if there is no express clause in the contract to that effect? In SG & R Valuation Service Co and Boudrais, the High Court said that because of their “wrongdoing” the two employees had forfeited their right to work and the employer therefore did not have to provide them with any.

Basic facts

Mr Boudrais was a director of HVS International (the UK trading arm of SG & R Valuation Service Co), having worked for the company since 1998. He resigned on 4 April, as did another director, Karen Smith, on 7 April.

A few days later, the company realized that they had been encouraging other members of staff to leave and join a competitor. They had also duped other staff members into giving them confidential company information which they then passed on to their proposed new employer.

The company ordered them to remain on garden leave for the duration of their three months’ notice period.

Arguments of the two parties

The two directors argued that their employer could not do that as there was no express garden leave clause in their contract. As they had a right to work and as their old employer would not provide them with work, their contract had been repudiated and they were therefore entitled to leave and go elsewhere.

The company argued that it had the right to invoke the power of suspension for 28 days (or longer in exceptional circumstances) under a clause in a new employment manual dated March 2008, pending disciplinary investigations. However, neither director had any recollection of seeing it and in any event, had not signed to say that they had received, read and understood the rules contained in it.

High Court decision

Express contractual power

The High Court said that even if the reference to the “HVS International Employee Manual” in the directors’ original employment contracts could be read as incorporating the manual, there remained the problem of Addendum 1 of the 2008 manual. This required employees to sign to say that they had received and read the manual and understood its rules. It also said that if the contents of the manual changed, then they would have to sign again to “indicate awareness of and understanding of these changed contents”.

There was no evidence that either of the directors had signed this addendum and the judge concluded therefore that there was no arguable case that they were bound by the manual or the power of suspension contained within it.

Implied right to work

The Court also said that as not all employees have a right to be provided with work, the proper approach was to look at the job description and contractual obligations and determine whether the obligation of the employer was just to pay the agreed remuneration or whether it also included the obligation to provide work.

In this case the two directors had a right to work because of the specialized nature of what they did. Their “significant skills” included attracting new work which involved keeping their contacts up to date and staying in tune with what was happening in the market. These requirements would be adversely affected by a substantial period of garden leave. They would also suffer financially as they would be unable to earn bonuses which were a substantial part of their remuneration package.

Importantly, however, the Court pointed out that the right to work was not absolute and there were circumstances in which employers were not obliged to provide work although the “employment contract is ongoing.” That included situations in which employees, as a result of a prior breach of contract, had made it “impossible or reasonably impracticable for the employer to provide work”.

That was clearly the situation in this case as the directors had exhibited behaviour that showed that they were not ready and willing to work in accordance with their contract of employment and had therefore forfeited their right to work. Despite this, their employer had the right to accept their breach of contract and keep them in work on garden leave.