UK: Termination - employees can be held to notice period and need not be paid if they refuse to work

The Court of Appeal has upheld a High Court ruling that, if an employee leaves without giving contractual notice (save in constructive dismissal circumstances), the employer has a choice whether to accept the breach as ending the contract, or to affirm the contract. If it chooses to affirm, it cannot force the employee to work but it can require the employee not to work for a competitor or contact clients (unless there is evidence that this would in effect compel the employee to return to work for the original employer). It can also require the employee to observe any restrictive covenants, provided the scope and full term of these are reasonable and enforceable at the date of the contract and it is reasonable to enforce them at the date of the injunction hearing. The Court of Appeal considered that the court's discretion on the latter point was not all-or-nothing and enabled it to enforce covenants only for part of their term.

Further, if the employer is willing for the employee to work during the notice period but the employee refuses, there will be no obligation to pay the employee during this period.

The case highlights the importance of making a prompt decision on how to respond to a repudiatory breach by an employee. If the decision is to hold the employee to the contract, care must be taken to avoid conduct which could be treated as accepting the breach (such as issuing a P45). Employers should also bear in mind the court's discretion to enforce only part of the term of a covenant (provided the full term was reasonable at the contract date).

Of course, in most cases an employer's desire to protect customer connections and confidential information will mean that it is safer to put employees leaving to join a competitor on garden leave, accepting that the amount paid to them during such leave is a necessary evil to keep them out of the market. It will be comparatively rare that an employer is willing to allow the employee to continue to work and thereby potentially be able to stop pay if the employee refuses to work. There are also a number of risks in taking the latter course of action: the court may conclude that the employer doesn't really want the employee back at work at all but is simply making a tactical request, and the longer the period the employee goes unpaid in a notice period (where he/she would normally be paid) the greater the chance that the court could hold that the employer is in effect forcing him/her to work for the employer. Making the wrong judgment call on such an issue can have unfortunate results if the employer is found to have committed a repudiatory breach of contract by not paying the employee, as this would entitle the employee to leave immediately and without any restrictive covenants to bind him. (Sunrise Brokers LLP v Rodgers, CoA)