HM Insights

Employee compelled to comply with contractual notice period

The Supreme Court held in the recent Geys case (Societe Generale, London Branch v Geys [2013] 1 AC 523) that an employee could hold an employer to the terms of the contract when the employer had failed to terminate the contract in compliance with the contractual terms. The interesting case of Sunrise Brokers LLP v Michael William Rodgers [2014] EWHC 2633 (QB) shows the High Court applying the same principles to an employee who purported to terminate his contract in breach of its terms.

Mr Rodgers worked for Sunrise Brokers LLP ("Sunrise") as a precious metals broker. He – perhaps unwisely given the inequality of terms - signed a contract of employment in October 2011, which provided that Sunrise could terminate the contract on 3 months' notice, but Mr Rodgers could not terminate the contract until the expiration of an initial fixed period of 3 years, and thereafter with 12 months' notice.

However, in March 2014 Mr Rodgers met with a rival brokerage and agreed to join them, unbeknown to Sunrise. Mr Rodgers went on pre-booked annual leave, but failed to return to Sunrise as expected. On 9 April 2014, Mr Rodgers attended a meeting with Sunrises' general counsel and stated that he was not returning to work, but going to New York instead.  Importantly, there was never acceptance of Mr Rodgers' action in breach by Sunrise; instead Sunrise instructed solicitors to outline that Sunrise did not accept Mr Rodgers' purported resignation as he was not entitled to contractually terminate his employment until September 2015 (the end of the fixed term period plus 12 months' notice).

Mr Rodgers was also informed his absence was being treated as a breach of contract and that Sunrise expected him to return to work. Mr Rodgers' solicitor responded to state that his client had resigned summarily in March 2014. After further legal correspondence, Sunrise raised an action for interim injunction, and unless and until Mr Rodgers turned up for work in the period to October 2014, he would continue to have no entitlement to be paid.

The High Court held that Mr Rodgers attempted to resign in breach of his contractual obligations.  Sunrise was entitled either to accept the breach and bring the contract to an end, or affirm the contract to keep it alive. Sunrise chose not to accept Mr Rodgers' resignation in breach. Therefore, Mr Rodgers remained employed by Sunrise. It was ordered that this should remain the case until October 2014 (Sunrise having offered this as a compromise position to Mr Rodgers). Mr Rodgers had argued that as Sunrise had refused to pay him whilst he did not attend work, this meant that the contract could not be affirmed. However, the Court held that as Mr Rodgers was not willing to work, there was no obligation to make payment. Further these actions did not, in themselves, terminate the contract of employment.

This case illustrates how a tactical approach by an employer in dealing with attempted resignations in breach of contract can keep the employment contract alive and prevent the employee working elsewhere. It was vital in this case that Sunrise never indicated that they accepted the resignation (of course, an employer does not have this choice if a resignation is made in terms compliant with the contract) and did not otherwise attempt to terminate Mr Rodgers' contract. Instead, they chose to hold Mr Rodgers to the terms of the contract, albeit agreeing an October 2014 departure date.

Therefore, a clearly stated position and quick action by Sunrise allowed it to prevent Mr Rodgers from working for a competitor in breach of the notice provisions in his employment contract, a simpler and more straightforward action than seeking to enforce post termination restrictions.