No pay without work for employee held to notice period

The High Court has ruled in favour of the employer of a precious metals derivatives trader who refused to accept his immediate resignation and declined to pay him unless he reported for work.

An employer generally has two options when faced with a senior employee who tries to resign without giving the full contractual notice. If the employer is not worried about post termination competition or the exploitation of their confidential information, the normal response would be to bring the employment to an immediate end by “accepting” the employee’s breach of contract. The employee would not be entitled to notice or any pay after the breach of contract is accepted.

Alternatively, if there is a risk the employee will set up or join a competing business, an employer may refuse to accept the employee’s breach. Since an employee cannot generally be compelled to work, the employer would invoke the garden leave clause in the contract (assuming there is one). By doing so, the employer excludes the employee from the marketplace and limits their access to confidential information, customers and employees. It buys time to protect the business, albeit the employee receives their normal pay and benefits whilst on garden leave.

Despite having the benefit of a garden leave clause, in this case the employer selected a third option. It met the employee 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 the employer suspended the employee’s pay while he continued to refuse to come to work.

The judge was prepared to accept that the employer genuinely wanted the employee to come back to work. It followed that its refusal to pay him when he failed to attend was not a repudiatory breach of contract and the employee was not entitled to insist he was placed on garden leave. The judge therefore granted a declaration that the employee’s contract remained alive until the reduced period of notice the employer was prepared to accept expired. Further, the employee was not entitled to be paid unless he attended work.

While many employers will not want to adopt such a risky approach, this case does illustrate a possible “third way” for employers when a trusted member of staff wants to leave immediately but where the employment relationship has not completely broken down. It allows an employer to try to hold the employee a period of notice, potentially without paying them if he/she refuses to work and if the garden leave clause is not invoked.

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