The New South Wales Supreme Court in BGC Partners (Australia) Pty Limited v Hickey [2016] NSWSC 90 has granted a nine month restraint against a broker who repudiated his employment contract by resigning with short notice to join a competitor.

Implications for employers

A contract of employment may continue despite the termination of the underlying employment relationship. The case demonstrates that depending on the wording of the contract, an employee can remain bound by restraints that apply for the duration of the contract, even though the employee is no longer “actually” employed by the employer. Employers should also carefully consider whether or not it is desirable to keep an employment contract on foot before accepting any contractual repudiation by an employee (which would terminate the contract). Contractual provisions such as restraints, bonus payments and long term incentives, which are subject to the termination of the employment relationship or contract, should be clearly drafted to ensure certainty and avoid costly disputes.

Background

Mr Hickey began working for BGC in April 2006. Under an express provision in his employment contract, Mr Hickey could not give notice of termination until July 2018. The period of notice required was three months. In November 2015, Mr Hickey purported to resign from his employment with BGC by providing four weeks’ notice pursuant to the Banking, Finance and Insurance Award 2010. At the time of resigning, Mr Hickey had already signed an agreement with one of BGC’s competitors whereby he would commence employment with them as soon as he was lawfully able to do so.

BGC rejected Mr Hickey’s resignation and maintained that he was unable to resign until 2018, relying on the termination clause in the contract. BGC then instituted proceedings seeking a declaration that the employment contract had not been terminated and was still on foot, as well as an order restraining Mr Hickey from acting inconsistently with the post-employment restraints in his contract. The restraint provisions were expressed to apply “during the term of your employment” and for six months “after its termination”.

Decision

Stevenson J determined that the express notice of termination provision in Mr Hickey’s employment contract operated to the exclusion of any other implied terms. Mr Hickey was not entitled to terminate the contract as he purported to do and this conduct amounted to repudiation. By refusing to accept Mr Hickey’s purported resignation, BGC rejected the repudiation and the contract remained on foot. Nevertheless, His Honour found that the “actual” employment relationship had ended on the final day that Mr Hickey worked for BGC.

The question before the Court was whether the restraint provisions were to be construed by reference to the life of the employment contract (which remained on foot), or the employment relationship (which was at an end). The words “during the term of your employment” were interpreted as a reference to the contract, not Mr Hickey’s actual employment. As a result, Stevenson J held that the post-employment restraints could not start operating until the time the contract was terminated. In the meantime, and while the contract remained on foot, Mr Hickey was restrained from obtaining other employment by what was essentially an exclusive service clause in his contract which applied “during his employment” (which was also taken to be a reference to the contract of employment).

In exercising his discretion, Stevenson J was not prepared to grant an injunction requiring Mr Hickey to comply with his contractual obligations for any longer than was reasonably necessary to protect BGC’s interests. Taking into account what Mr Hickey had agreed to do (give three months’ notice and not compete for a further six months), Stevenson J ordered that he be restrained from working for nine months from the date his employment actually ended.

BGC Partners (Australia) Pty Limited v Hickey [2016] NSWSC 90