The case of BGC Partners (Australia) Pty Limited v Hickey1 shows that obligations in a contract of employment can continue even where one party has repudiated the contract. 

Background

Only three companies in Australia carry on business in the highly specialised “capital markets broking industry”: BGC Partners (Australia) Pty Limited (BGC), Tullett Prebon (Australia) Pty Ltd, and ICAP Australia Pty Ltd (ICAP).

In total, these three companies employ around 45 interest rate swap brokers in Australia. Anthony Hickey was one of these brokers. He was employed by BGC on a salary of $400,000 per year.

Mr Hickey’s contract of employment contained restrictive terms which were to continue to apply after the termination of his employment, reflecting the fact that he was highly sought-after by each of the three competitor companies. Critically, Mr Hickey could not give notice of termination of employment until July 2018 and could not give less than three months’ notice.

The contract also made it clear that Mr Hickey was required to devote the whole of his working time to BGC’s business and could not hold other employment or a competing interest in any other company.

In late 2015, Mr Hickey accepted employment with BGC’s competitor ICAP and purported to resign from BGC by giving four weeks’ notice. BGC refused to accept his resignation, but Mr Hickey nonetheless ceased attending work four weeks later.

Legal action

BGC commenced proceedings in the New South Wales Supreme Court. It sought a declaration that the contract remained on foot, as well as orders restraining Mr Hickey from acting inconsistently with his obligations and post-employment restraints.

Justice Bromberg held that while Mr Hickey’s “actual employment” with BGC had ended, his contract of employment remained on foot. His purported resignation was not effective because it did not comply with the terms of the contract. It therefore constituted a repudiation of the contract, which BGC had refused to accept. This meant the contract of employment continued.

The Court considered the wording of the contract and in particular the meaning of the phrase “during the term of your employment”. The Court held that “during the term of your employment” referred to the life of the contract, not the actual employment. As a result, the post-employment restraints could not start operating until the contract itself was brought to an end.

However, Mr Hickey was nonetheless restrained from obtaining other employment because the contract prohibited him from holding other employment during his employment with BGC. The Court said it was reasonable to restrain Mr Hickey from working for a competitor for a period of nine months, taking into account the contractual terms requiring him to give three months’ notice as well as the six-month contractual restraint period.

Bottom line for employers

This case highlights the need for employers to be mindful that a court may determine that obligations in a contract remain on foot even where one party has repudiated the contract.

It is important to consider whether it would benefit you to keep the employment contract on foot before accepting a repudiation by an employee.

KEY POINTS

  • A court may determine that obligations in a contract remain on foot even where one party has repudiated the contract.
  • Employers should be cautious not to accept an employee’s repudiation of their employment contract if they intend to rely on provisions which require the contract to remain on foot.