Elsevier Ltd v Munro

An employee cannot establish constructive dismissal by resigning on notice and later asserting that the employer’s earlier conduct was repudiatory. Giving notice affirms the contract in part. A breach of trust and confidence requires conduct without reasonable and proper cause which is calculated or likely to destroy or seriously damage the relationship.

An injunction may restrain an employee from working for a competitor during the contractual notice period where the employee remains paid, the employer is willing to provide work, and competition would cause unquantifiable damage. A real risk of misuse of retained confidential information provides an additional ground. The restraint need not satisfy the full post-termination restraint-of-trade test.

The claimant publishing company employed the defendant as a senior financial officer under a contract requiring 12 months’ notice. The contract prohibited work for a competing business during employment and included a garden-leave provision. After accepting an offer to become CFO of Cengage, the defendant gave notice and stopped working at the end of May 2014.

The defendant contended that changes to his role, the absence of a dedicated CEO, and the claimant’s conduct during the notice period amounted to repudiatory breaches which he had accepted, or alternatively that an injunction would improperly compel idleness. The claimant sought final injunctions enforcing the contractual prohibition on competing work and protecting confidential information.

The central issues were whether the defendant had been constructively dismissed and whether injunctive relief was appropriate.

1. Constructive dismissal. The defendant had affirmed the contract by continuing in employment after the alleged earlier breaches, accepting the Research CFO role, and later giving notice rather than resigning immediately. He could not rely on those earlier matters to establish repudiation. The contract required the claimant to provide work reasonably consistent with the defendant’s status as a CFO, but it did not require a dedicated CEO or preservation of the former management structure.
2. The Research CFO role was substantial and appropriate to the defendant’s status. The allocation of some Finance Director responsibilities did not amount to a de facto demotion. The claimant’s conduct did not lack reasonable and proper cause or threaten the relationship of trust and confidence. The defendant’s decision to leave was driven by the attractive career opportunity at Cengage, not by repudiatory conduct. He was therefore not constructively dismissed.
3. Injunction. The contractual prohibitions on working for a competitor during employment were valid and enforceable. The court would not grant specific performance of a positive obligation to work, but could restrain breach of negative obligations. The garden-leave authorities did not prevent relief: the defendant was being paid, the claimant remained willing to provide work, and his idleness resulted from his own choice.
4. Cengage was a significant competitor of the claimant’s Nursing and Health Professions businesses. Employment by Cengage during the notice period would foster a rival’s business and cause damage which could not adequately be compensated by damages. A final injunction was therefore justified until 10 April 2015. The additional risk that the defendant would unconsciously misuse retained strategic, pricing and other confidential information reinforced that conclusion.
5. The claimant’s proposed injunction restraining breach of the duty of good faith was too vague and uncertain and was refused. An injunction was granted enforcing the prohibition on working for Cengage during the contractual notice period.