Two recent cases in the High Court have established that employers can enforce notice periods by injunction (Sunrise Brokers LLP v Rodgers and Elsevier Ltd v Munro), even though they had stopped paying the employees.
In both cases:
- the employees had purported to resign in breach of contract, making clear that they were not willing to work their contractual notice periods;
- the employees were leaving to join competitors of their employers;
- the employer did not accept the resignation and asked the employee to work the notice period, thus keeping the contract alive.
The High Court found that because the employees had made it clear that they were not willing to work, the fact that the employers had not paid them did not bring the contract to an end.
What does this mean for employers?
If a key employee seeks to resign in breach of their notice period provisions:
- Beware of your leaving process. Instigating the usual termination processes (eg. confirming termination date / payments, issuing a P45, etc.) is likely to be treated as an employer accepting the resignation in breach of contract (thereby waiving the right to enforce the notice period). It should therefore ensure that it responds to the alleged breach, setting out its position.
- Consider whether you want to enforce the notice period. Consider the likely damage that the business could suffer if this employee does not keep to the contractual notice period. Do you need a handover in order to retain key clients? Does he/she have confidential information and/or client relationships which the employer has a continuing interest to protect? Is he/she likely to compete, poach employees and/or solicit clients?
- Be explicit about rejecting the resignation. Inform the employee that he/she remains in employment and is bound to work his/her notice period.
- Only ask for a return to work if you actually want the employee to work his/her notice period. It will not be helpful to you if you ask the employee to return to work when you don’t really mean it. Check the employee’s contract, for example, are you willing to let the employee continue to have client contact? It is worth ensuring your standard employment contract allows you to ask the employee to undertake different duties during his notice period (e.g. not have client contact etc), this will give you flexibility in these circumstances.
- Only stop paying the employee when he/she has made it clear he/she is not willing to return to work. Beware of any pre-booked holiday for example. If the employer failed to pay the employee in relation to annual leave, it could form the basis for a constructive dismissal allowing the employee to escape his/her notice period and post-termination restrictions.
- Consider whether garden leave would be more appropriate. This would mean that you would have to continue to pay the employee even if he/she is not willing to work, but may be more realistic if you want to prevent the employee from having access to clients and confidential information. The garden leave period can also be enforced by way of injunction.
If you have any immediate queries about the issues raised in this article, or you receive an employee’s resignation which you suspect may be a repudiatory breach, please do contact the authors or your usual Fox Williams’ adviser.