If an employee is given notice and goes on garden leave, what are the consequences if they go to work for another organisation? Esther Smith and Matthew Whelan advise.
The question
If, within a contract, it states that when a person gives notice and goes on garden leave they cannot work for anyone else, can you advise what the consequences would be if they did? I guess an injunction could be taken out but what else could be done?
Secondly, when a person is on garden leave, what are their rights with regards to bonus payments? If they are not in a business effecting it, could they argue they have restricted potential to earn bonus? I was under the impression that this would be illegal. I thought you could not restrict somebody’s earning?
Legal advice
Matthew Whelan, solicitor, Speechly Bircham
If the employee went to work for someone else in those circumstances then they would be in breach of contract. You may be able, as part of a breach of contract action, to obtain an injunction to prevent the employee from working during their notice period. You need to act quickly to be able to do this and I suggest you take legal advice as soon as possible. You would also be entitled to damages for breach of contract to compensate you for any loss you suffer from the breach of contract.
You could potentially discipline and dismiss the employee, although you would need to think carefully about whether this would be the correct course of action as it may not meet your objectives and there are steps you would need to take to be able to do that.
With regard to bonus entitlement during garden leave, this is determined largely by what it says in the contract of employment or other documentation setting out the detail of the bonus entitlement. If the contract states that the person does not have a right to accrue a bonus during any period of garden leave then you would not usually have to pay it. You need to be careful not to breach the contract as if you do you may loose your right to rely on other parts of the contract such as the garden leave right and any restrictive covenants.
Matthew Whelan can be contacted at Matthew.Whelan@speechlys.com. For further information, please visit www.speechlys.com.
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Esther Smith, partner, Thomas Eggar
If an employee works for another party when they are contractual bound to you, you would in theory have a remedy of breach of contract against them. Again, in theory, you might want to seek an injunction to prevent them from doing so although in reality the costs of doing so would most likely be incredibly prohibitive.
Your easiest and most effective route would be to withhold pay and you could also, if you wanted to, take disciplinary action to dismiss for gross misconduct on the basis that their breach of contract was fundamental. The decision to take this action would probably depend on how long the notice period was and how senior the employee in question was. By stopping pay if the employee is working elsewhere, you may find that the employee puts in a breach of contract claim against the employer, which you can then counter claim for their breach.
In relation to your second question, this is really a matter of contract. Unless the contract provides otherwise, an employee should still get their contractual benefits during their period of garden leave as they are still and employee of the organisation and still subject to the terms of the contract of employment.
The point on restricting someone’s ability to earn is a bit of a different issue – there is a general principle on restraint of trade which seeks to prevent undue restraints being put on employee post termination and will affect an employer’s ability to enforce restrictive covenants. However, this principle should not affect an employee’s entitlements during a notice period, which would, as mentioned above, be governed by contract.
Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information, please visit www.thomaseggar.com.
