In a ground-breaking decision, the High Court has ruled that, where an employee leaves his job without notice and ceases to be paid, the employer is still entitled to keep his employment contract alive and to prevent him working for competitors.
A derivatives trader’s contract required him to give 12 months’ written notice before leaving his job. However, on receiving an offer of employment with a rival company, he announced that he was leaving immediately and would never return.
The company for which he worked launched proceedings against him, claiming that he was still one of its employees and bound by restrictive covenants in his contract preventing him working for competitors during his notice period, which had been reduced by agreement to six months.
The company argued that, by ‘vanishing without agreement’, the trader had caused it serious prejudice by jeopardising its hopes of holding onto his client base. It had ceased to pay his salary following his departure on the basis that he was no longer ready and willing to do his job. However, the trader, who was living on his savings, insisted that the company could not purport to continue to employ him whilst refusing to pay him and that his contract had come to an end on the day on which he walked out.
Ruling in the company’s favour, the Court found that it had good reasons for seeking to affirm the trader’s contract. It was entitled both to cease paying him whilst he refused to return to work and to stand on its contractual rights in seeking to prevent him from working for a rival for as long as possible.
Noting that the trader had ‘simply absented himself from work’, the Court issued an injunction which, during the six-month period, prevented him from contacting the company’s clients and from taking up his new post with the rival company or any other similar competitor.
This decision will be welcomed by employers. Note however, that an employer can only rely on this decision, and obtain an injunction, if the contract of employment contains restrictive covenants i.e. clauses preventing an employee from working for a competitor, and the normal rules on enforceability still apply. A court will only enforce a restrictive covenant if it is designed to protect legitimate business interests and goes no further than necessary to protect them.
If you need any advice on a contract, our employment lawyers can help you. We have offices in Ipswich, Felixstowe and Hadleigh. You can contact us on 01473 211121 or email [email protected]