Garden Leave without contractual provision

Can an employer enforce garden leave absent a specific power in the contract of employment? Lawyers are always cautious on advising on enforcement of garden leave, as if in excluding the employee from work the employer puts itself in breach of any express or implied terms of the contract then the employee can resign without penalty. Garden leave is crucial however to an employer’s response to a key member of staff leaving, it can set up its new arrangements, contacts and personnel without having the immediate pressure of competition from the departing employee.

In the recently reported High Court case of SG & R Valuation Service Co v Boudrais & Ors [2008] EWHC 1340 (QB) the contract of employment had no such provision, therefore the court had to determine whether enforced garden leave is compatible with their existing contracts. It is settled law that there is no implied obligation on an employer to provide work for the employee: the oft-quoted principle being from Asquith J in Collier v Sunday Referee Publishing Co [1940] KB 647:

Provided I pay my cook her wages regularly she cannot complain if I choose to take any or all of my meals out.

This creates quite an image of a bachelor Asquith in war-torn Britain, being dressed by his valet in the morning, writing the odd judgment, before deciding whether it’s dinner at home or at his club. I hope it was like the Drones.

Collier is only the starting point however. The fact is that for many high value employees is their skills and expertise, as well as the interests of their own career, require them to remain in work. This will especially so if their future prospects are damaged by time away from the workplace. In this case it was held that “any dissociation from the market for a substantial period would result [the employees’] skills becoming stale”, and furthermore that a substantial part of their remuneration was performance-related bonus that they would be unable to achieve if kept from work. This means that a right to work must be placed in the contract of employment – given the nature of the parties this must have been the bargain they struck.

Mr Justice Cranston goes on to consider if this right to work is qualified in any way. He holds that it is, and usefully sets down the principle:

Employees who have a right to work have that right subject to the qualification that they have not, as a result of some prior breach of contract or other duty, demonstrated in a serious way that they are not ready or willing to work, or, to put it another way, that they have not rendered it impossible or reasonably impracticable for the employer to provide work. The breach of contract or other duty must constitute wrongdoing, by reason of which they will profit or potentially profit. In such circumstances, there is no obligation on the employer to provide work, although the contract of employment is ongoing. This is not an implied term in the employment contract but is a qualification to the legal construct, the right to work.

On the particular facts – emails between the departing employees which made their destructive intentions clear – the company did have a right to enforce garden leave. This case is a very useful reference point for employers, but also provides important safeguards for the “innocent” employee.

This case illustrates what a particular and nuanced exercise it is to construe a contract of employment in comparison with, say, a simple commercial contract. Also, finally, I was pleased to see the following at paragraph 17: 

Reference was made by the claimant to the ACAS Code of Practice on Disciplinary and Grievance Procedures. That suggests, sensibly enough, that where there is a difficulty with an employee and an allegation of gross misconduct a brief period of suspension on full pay should be undertaken. As I have said, that may well indicate good practice, but it says nothing about the contractual position of these defendants. Not only is there no evidence it was incorporated in their contracts, by usage or otherwise, but it lacks contractually binding language.

ACAS guidance is simply that – guidance as to good employment relations. Although failure to follow that guidance can be indicative of the reasonableness of a party’s action, or have statutory consequences, I’m pleased that the court here so thoroughly rejects it as valid extraneous evidence as to the construction of a contract of employment.