Labour & European Law Review Weekly Issue 400 17 December 2014
Courts generally require employers to give an undertaking to pay their employees during the period of an injunction restraining the employee from working for a competitor. In Sunrise Brokers LLP v Rodgers, however, the Court of Appeal held that the injunction granted by a High Court judge did not compel Mr Rodgers to return to work and the company was not obliged to pay him.
Mr Rodgers, a derivatives broker, signed a three-year contract with Sunrise in September 2011. This stated that he could terminate the contract after the three years by giving 12 months' written notice. It also contained various post-termination covenants and a set-off provision whereby the period for those restrictions would be reduced by the amount of time he had spent on garden leave.
In March 2014, he told his employer that he was leaving with immediate effect. Sunrise made clear that he was precluded by his contract from working anywhere else until September 2015. It also refused to pay him his salary and bonus for April. He replied that he had resigned with effect from 27 March and would not be returning. In any event, he was entitled to terminate his contract by reason of the non-payment of April’s salary and bonus. Sunrise agreed to reduce the notice period and asked him return to work until 16 October, but he refused.
The company applied to the High Court for a declaration that Mr Rodgers remained an employee until 16 October and was prohibited from working for a competitor until 16 April 2015.
The High Court held that Mr Rodgers was still an employee of Sunrise and therefore bound by a notice period whilst having no right to force the conversion of his notice period into garden leave (for which he would have been paid). On the contrary, given that Mr Rodgers was not willing and ready to work for his employer, the Court ruled that Sunrise was within its rights to refuse to pay him, Nor did it accept that the injunction meant that Mr Rodgers was compelled to return to work for Sunrise.
The judge also made an order that Mr Rodgers should not work for any competitor firm to Sunrise, or contact his former clients until 16 October. With regard to the period following 16 October, the judge limited the order to enforce the post-termination covenants in the contract to ten months.
Mr Rodgers appealed on a number of grounds, notably that the judge should not have granted Sunrise an injunction without requiring the company to pay him for the duration of the injunction. He argued that this breached the legal principle that an employee cannot be compelled to work. He also argued that ten months was excessive as the existence of a set-off clause between the garden leave clause and post-termination restrictions meant that Sunrise only needed six months of protection.
Decision of Court of Appeal
The Court of Appeal agreed that it was common practice for courts to require employers to give an undertaking to pay their employee if enforcing the injunction meant that the employee would be compelled to return to work for them because of financial hardship. However, that obviously depended on the facts of the particular case. In this case, the Court had not found any evidence to support that contention, not least because Mr Rodgers had not submitted any evidence about his financial circumstances.
In relation to the set-off clause, the Court of Appeal ruled that the High Court was entitled to have regard to what would have happened if Mr Rodgers had given the 12 months’ notice required under his contract. That is, that he would not have been put on garden leave immediately and thus would have been bound to Sunrise for more than six months. The duration of the injunction was not unreasonable, but rather reflected the consequence of Mr Rodger’s actions in absenting himself from work.