Garden leave: right to work undermined by behaviour

FACTS When Mr Boudrais and Ms Smith resigned from employment with SG&R Valuation Service Co, each gave three months’ notice as required by their employment contracts. Both were leaving to join a competitor. Almost immediately, the company began to uncover wrongdoing by the employees including appropriation and disclosure of confidential information, plans to take business opportunities to their new employer, solicitation of staff and an expressed intention to damage the company’s business.

Although there was no contractual entitlement to do so, the company asked the employees to remain at home on garden leave. A few days later, the company suspended the employees pending disciplinary action. The employees then resigned with immediate effect alleging a repudiatory contractual breach by the company in placing them on garden leave.

DECISION The High Court was asked to grant an injunction placing the employees on garden leave for the duration of their notice periods even though there was no express contractual garden leave clause.

The court first considered if, under their employment contracts, the employees had the right to work. It decided that, in this case, there was such a right. The employees’ work was specialised and they had significant skills including attracting new business. Being out of the market for a substantial time period would result in those skills becoming stale. Also, the employees would be adversely affected by their inability to earn bonuses, which were a substantial part of their remuneration packages.

Having established that there was a right to work, the court observed that this right is not absolute requiring the employer always to provide work and never to keep the employee away. The right is subject to the qualification that the employee must not have demonstrated, by a breach of contract or duty, that they are not ready or willing to work. Where there is such a breach which constitutes wrongdoing and by reason of which the employee will potentially profit, then there is no obligation to provide work.

The court held that the pair had a right to work, but their behaviour (in particular the specific hostility shown towards the company) had demonstrated that they were not ready and willing to work in accordance with their employment contracts. As such, the company was entitled to place them on garden leave and the court granted an injunction under which the employees remained subject to their contractual and other duties for the three-month notice period.

IMPLICATIONS For employees with valuable business connections and access to confidential information, employers should ensure that a garden leave provision is included in the employment contract. Without this, it can be difficult to keep an employee away from work during the notice period. As this case demonstrates, garden leave may be possible where there is clear proof of wrongdoing which amounts to a breach of contract or of duty. However, obtaining specific evidence of such conduct is difficult.

Jane Hannon, associate, DLA Piper

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