Legal update: Can an employee who resigns with immediate effect in repudiatory breach of contract be held to their notice period without pay if they refuse to work?

29 August 2014

Yes, said the High Court.

In Sunrise Breakers LLP v Rodgers, the High Court confirmed that an employment contract can subsist, if the employer refuses to pay salary for the notice period, if the employee refuses to work it. The employer can, in such circumstances, obtain an injunction requiring an employee to observe the contractual terms, such as a non-compete clause and non-solicitation and non-dealing with clients restrictions, without compelling the employee to work.
 

The High Court held that Mr Rodgers had been in breach of contract when he resigned with immediate effect, as it was a not a constructive dismissal scenario, entitling him to do so. The employer, Sunrise had the option to either accept Mr Rodger’s repudiatory breach in resigning without notice, or to affirm the contract, if it had good reason for doing so. Sunrise  had good reason for affirming the contract, as it wished to prevent Mr Rodgers from working for a competitor. The High Court held that the employer had not accepted Mr Rodger’s repudiatory breach and it had not lost its right to affirm the contract by ceasing to pay Mr Rodgers, when he made it clear to them that he would not be returning to work during the notice period. Willingness to work and wages are mutual obligations, which means that the obligation to pay the employee is suspended until the employee’s mutual obligation to work is performed.

The Court would not enforce performance of the contract i.e. the obligation to work  by way of an injunction. There is a statutory prohibition (section 236 of TULRCA 1992) against compelling an employee “to do any work or attend any place for the doing of any work”. However, the Court granted an injunction requiring Mr Rodgers to respect his contractual terms (although not to perform work). For the period of the injunction, he was prevented from working for a competitor and from contacting clients of Sunrise. The injunction did not have the effect of compelling Mr Rodgers to work for his former employer or “Starve and be Idle”. Nor was it oppressive to him, as he had indicated that he would not be starting work for his new employer, (a competitor) for some months.

While a standard resignation does not have to be accepted in order to be effective, a purported resignation in breach of contract does require acceptance before it is effective. It is extremely important for employers in such situations to think tactically and strategically before deciding what to do and not to react angrily on impulse. Sunrise could easily have inadvertently accepted the employee’s repudiatory breach either by casual words following his resignation or by sending him his P45 when he failed to attend work. Alternatively he could have been dismissed once he went absent without leave.

If the employer has a continuing interest to protect i.e. to prevent an employee from competing with it or soliciting or dealing with its clients, then the employer should seek employment advice and consider carefully how to respond to the resignation in breach of contract.

Further information

For more information on this topic, please contact a member of our employment team.

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