Case update (2): Notice period: no work, no pay

Summary: (1) Is an employee’s resignation with immediate effect, in breach of contract, effective and (2) if the employee then refuses to work does the employer need to continue to pay him?

(1) Not if the employer does not accept the resignation and (2) no, says the High Court in Sunrise Brokers LLP v Rodgers available here.

Facts: Mr Rodgers was subject to notice and post-termination restrictions in his contract of employment with Sunrise. In April 2014 Mr Rodgers told Sunrise that he was leaving, ignoring the fact he was subject to a fixed term contract to 22 September 2014, only terminable on 12 months’ notice.

Mr Rodgers also had a garden leave clause in his contract. However, Sunrise chose not to seek to rely on this and instead met with Mr Rodgers to try to persuade him to change his mind, and failing that, to agree a “sensible termination plan”. This would have involved a series of handover meetings with clients and colleagues over a reduced notice period. No agreement was reached, so Sunrise suspended Mr Rodgers’ pay while he continued to refuse to come to work. Sunrise confirmed that payment would recommence if he returned to work.

Sunrise issued proceedings in the High Court against Mr Rodgers in May 2014, seeking an interim injunction and argued that Mr Rodgers remained employed and should be required to do a handover of clients. Mr Rodgers argued that Sunrise could not claim to continue to employ him while refusing to pay him.

The High Court was prepared to accept that Sunrise genuinely wanted Mr Rodgers to come back to work and declared that the employment contract was still in existence and would come to an end on 16 October 2014 (the date Sunrise had offered as an early release from the notice period). The High Court ruled that Sunrise did not lose its right to consider Mr Rodgers remained employed by its decision to cease payment to Mr Rodgers, as the employee must be ready and willing to work in exchange for wages and vice versa.

The High Court agreed that it was forbidden to compel Mr Rodgers into “forced labour”. However, it was appropriate to grant an injunction ordering Mr Rodgers to observe the other terms of his contract (e.g. not working for a competitor and not contacting his former clients), until 16 October 2014.

Implications: If an employee refuses to work, the employer need not pay them. It is not always the case that if an employer refuses to pay a member of staff this will be a fundamental breach of contract.

When a trusted member of staff wants to leave immediately and the employment relationship has not completely broken down, it is open to employers to try to hold the employee to a period of notice. This can be done without paying them if he/she refuses to work and if the garden leave clause is not invoked. Employees do not have either a right to cut short their contractual notice period or to insist on being placed on garden leave. It is the employer’s choice.

Employers should carefully consider the short and long term impacts of an employee resigning in breach of contract and seek legal advice on immediate actions to be taken. The case highlights the importance of having well-written notice and covenant clauses in employment contracts and the importance of giving careful consideration of how to respond to a resignation in breach of contract where, as here, there is a continuing interest to protect.