If an employee walks out, refusing to work his notice period, can an employer elect to keep the contract of employment alive, without paying the recalcitrant employee?  

In the case of Sunrise Brokers LLP v Rodgers [2014] EWHC 2633 (QB), the High Court held that the answer to this question is yes.

No work, no pay  

Mr Rodgers had entered into a fixed-term employment contract from which he could not lawfully resign until 22 September 2014.  He was then required to give 12 months’ notice, which meant that he could not lawfully bring his employment with Sunrise Brokers LLP (Sunrise) to an end until September 2015.  Thereafter, he was subject to a suite of restrictive covenants of between six and 12 months’ duration.

He walked out on 27 March 2014 and informed Sunrise on 16 April 2014 that he was giving written notice of his resignation.  Before resigning he had accepted employment with one of Sunrise’s competitors and had agreed to start work for that competitor at a later date.

Sunrise chose not to accept Mr Rodgers’ purported resignation, as it was in breach of the terms that had been agreed.  It instead took the view that the contract of employment remained alive.  However, because Mr Rodgers was refusing to come to work, Sunrise refused to pay him.

Unable to persuade Mr Rodgers to return and hand over his clients, Sunrise applied to the High Court for an injunction to compel him to: (1) abide by the terms of his contract until the expiry of his notice period (which it voluntarily agreed to curtail to 16 October 2014) and (2) abide by his restrictive covenants thereafter.  For his part, Mr Rodgers claimed that Sunrise’s refusal to pay him amounted to a repudiatory breach of contract that entitled him, from the date of non-payment, to walk away.

The High Court held that the principle of “no work, no pay” applied in such circumstances.  Sunrise had not chosen to put Mr Rodgers on garden leave and he could not oblige it to do so.  Rather, Sunrise had asked Mr Rodgers to return to work and he had refused.  The Court therefore declared that the employment contract remained alive and well, and that Sunrise was not acting in breach of contract by refusing to pay.

Held to the contract

The High Court also issued an injunction holding Mr Rodgers to the terms of his employment contract until 16 October 2014 and to his restrictive covenants until 26 January 2015.

Mr Rodgers therefore has a choice.  He can go back to work for Sunrise up to 16 October 2014, in which case Sunrise will be obliged to pay him.  But if he refuses he will remain unpaid.  In either case, he will be unable to start work for his new employer until 27 January 2015 and has been ordered to pay Sunrise’s legal costs.

Comment

When employees walk out without giving notice they usually claim that they are entitled to do so because of the way the employer has behaved.  In short, they claim to have been constructively dismissed, with the effect that they are not bound either by the notice period or by any restrictive covenants.  Mr Rodgers did not claim that he walked out because he had been badly treated.

This decision will not help an employer who has behaved badly and constructively dismissed an employee.  But it does confirm that, in circumstances where the employer is not at fault, refusing to pay a recalcitrant employee should not weaken the employer’s position or inadvertently terminate the employment contract, thus giving the employee what he wanted in the first place.

It should also provide a powerful disincentive for employees who might previously have been tempted to try to force their employer’s hand by refusing to work during a notice period.  An employee who tries this tactic can now expect to lose his notice pay and to find himself out of the market for longer than he would have done if the employer sought to enforce the covenants alone.  That is because, in circumstances such as these, the employee is technically not on garden leave.  This means that any provisions in the contract that offset time spent on garden leave against the period of restraint in the covenants will not apply.

In response to this decision, employers should:

• Check employment contracts to ensure that employees are prohibited from doing any other work during the term of their employment contract

• Ensure that the contract clearly states that an employee who refuses, without good reason, to work will not be paid

• Respond quickly and decisively to any walk out by key personnel, taking legal advice at an early stage about the merits of employing this strategy

• Continue to structure notice periods and restrictive covenants so that they are tailored as closely as possible to each individual, and re-visit them after each promotion or change of role