Sunrise Brokers LLP v Rodgers

An employee’s repudiatory renunciation does not automatically terminate the employment contract. The employer may affirm the contract where it has a legitimate and non-perverse reason for doing so, including a genuine hope of the employee’s return or a legitimate wish to prevent work for a competitor.

Work, or readiness and willingness to work, and wages are generally concurrent obligations. Non-payment while the employee refuses to work suspends the wage obligation but does not itself terminate the contract or amount to acceptance of the repudiation. Injunctive relief must nevertheless be assessed separately. A court may enforce carefully limited negative obligations where the order does not effectively compel work or attendance. Post-termination restraints must be judged at the time of enforcement and may be modified to the period reasonably necessary to protect legitimate interests.

Sunrise sought declarations and injunctive relief against Mr Rodgers, a derivatives broker who left without contractual notice after accepting employment with a competitor. Sunrise maintained that he remained employed, while refusing to pay him unless he returned to work, and sought enforcement of contractual restrictions during and after the notice period.

Mr Rodgers argued that Sunrise had accepted, or had itself committed, a repudiatory breach by stopping his pay. He also contended that the proposed injunction would indirectly compel him to work or leave him without a livelihood. The court first determined whether the employment contract continued and then considered the appropriate scope of injunctive relief.

1. Continuance of the contract. Applying Societe Generale, London Branch v Geys [2013] 1 AC 523, the court held that Mr Rodgers’ renunciation did not automatically terminate the contract. Sunrise could affirm it if it had a good reason. It had such a reason when the decision was made: it genuinely hoped that Mr Rodgers might return and, subsequently, had a legitimate commercial interest in preventing him from joining a direct competitor.
2. Wages and work. Work, or readiness and willingness to work, and wages were concurrent obligations. The failure of one party to perform suspended the corresponding obligation, but did not automatically destroy the contract. Mr Rodgers was not entitled to salary while refusing to work, and Sunrise’s decision to stop paying him did not accept his repudiation or constitute a repudiatory breach. The contract contained no contrary provision.
3. Notice-period relief. Section 236 of the Trade Union and Labour Relations (Consolidation) Act 1992 prohibited an order which compelled work or attendance. An injunction in the broad terms sought was inappropriate. However, a limited order restraining work for EOX or a similar competitor and contact with former clients would not have a relevant compulsive effect on these facts. Sunrise was not required to pay Mr Rodgers unless he chose to return and work.
4. Post-termination restrictions. The validity of the covenants when made did not determine whether, or to what extent, they should be enforced at termination. The court could modify the period to reflect the protection reasonably necessary at the date of enforcement. It allowed six months for the contractual restraint and four additional months to reflect a realistic handover period, producing an expiry date of 26 January 2015.
5. The court declared that Mr Rodgers remained employed until 16 October 2014, subject to any intervening event, and ordered enforcement in modified form of the pre-termination and post-termination restrictions. Costs were reserved for further argument.

not stated in the judgment.