An employer who directed an employee to take ‘gardening leave’ during his notice period has been found to have repudiated the employee’s contract of employment by requiring the employee to return his work car and phone.
In Actrol Parts Pty Ltd v Coppi (No 2), the employer directed its employee, who had given notice of his resignation, to take leave with pay for the duration of his four week notice period (ie. ‘gardening leave’).
While there was no express provision in the employment contract stating the employer could direct the employee to take gardening leave, the court found it was fair to imply such a term into the contract because there was reason to believe the employee would commence work with a competitor.
However, the employer not only placed the employee on gardening leave but also required him to return his work car and phone. The court found this amounted to a reduction in the employee’s salary and a repudiation of the contract. The contract of employment was consequently terminated when the employee accepted the repudiation by commencing employment with the competitor.
The employer was therefore deprived of the opportunity to restrain the employee from competing with its business for the remainder of the notice period. Had the contract contained a restraint clause, the employer may also have lost the opportunity to rely on it.
Employers, take note!
How are your interests protected in the event an employee leaves? Can you alter an employee’s duties, place a resigning employee on gardening leave, and restrain an employee from competing with your business? You need to consider incorporating such terms into your employment contracts and, in order to rely on them, ensure you are complying with your own obligations by maintaining employee entitlements throughout any notice period.