In brief

  • In March 2011, the Singapore High Court upheld the summary dismissal of an employee during a period of garden leave.
  • The High Court found that the employee seriously breached his contract of employment by releasing a client list to a third party during the period of his employment. However, the employer was only awarded nominal damages for breach of contract due to a lack of evidence regarding causation of damage to its business as a result of the breach. 
  • Despite the employee’s serious breach of his contract of employment, the High Court found that he was still entitled to a contractual post-employment payment in consideration for compliance with post-employment covenants, as there was no evidence that those covenants had been breached after his employment was terminated.

In a judgment given in March 2011 in Surteco Pte Ltd v Siebke Detlev Kurt and another [2011] SGHC 74, the Singapore High Court upheld the summary dismissal of an employee during a period of garden leave.

Background

The plaintiff (the employer) was a manufacturer and marketer of paper or plastic edge bandings, synthetic resins, impregnated paper laminates and foils, and roller shutters. The defendant was employed by the plaintiff as an Area Sales Manager, Asia. Although the employee exhibited poor performance soon after commencing employment in his role, initially his employment was not terminated ‘out of compassion’ for his livelihood. He was later terminated with a retrenchment package, but required to work out his notice. When his job performance deteriorated further, he was placed on garden leave until the expiry of his six months’ notice. Upon placing the employee on garden leave, the employer discovered information on the employee’s returned company laptop that indicated that the employee had been conducting his own sideline business and had told a friend that he had released confidential client lists to a third party. The employee was then summarily dismissed.

The employer’s claims

The employer claimed damages for breach of contract and also sought injunctive relief. Firstly, the employer claimed 50% of the remuneration and benefits paid to the employee during his employment, because he had not worked exclusively for the plaintiff in accordance with his employment contract. That claim was denied, as there was no evidence that the employer had suffered a loss of that amount as a result of the employee’s sideline business.

A further claim for SG$782,000 in lost profits was also denied. Again the High Court held that there was no satisfactory evidence of the causal connection between distribution of the client list and impact on profits. The High Court also commented that the employer was not in a position to claim damages due to the employee’s poor performance, given that the employer claimed that it knew quite soon after hiring the employee that his performance was poor and yet the employee was not dismissed earlier due to compassionate grounds.

The employer was awarded only nominal damages. However, the plaintiff was successful in its application for an injunction to restrain the employee from using or disclosing the company’s confidential information and trade secrets.

The employee’s claims

The employee claimed for sums allegedly owed to him by his employer. The success of some of those claims depended on whether or not the employer was entitled to summarily dismiss the employee. The High Court found that the employee seriously breached his contract of employment by conducting a sideline business and releasing a client list to a third party during the period of his employment, and subsequently the High Court denied claims by the employee for certain contractual payments.

The employee also claimed SG$20,000 under a term of his employment contract which required the employer to pay him that amount after his termination as consideration for compliance with restrictive covenants contained in that contract. The High Court held that the employee was entitled to receive that payment, as there was no evidence that he had breached the covenants after termination of his employment.

Implications for employers

This decision highlights the difficulties involved in proving that damages flowed from an employee’s breach of confidentiality, and quantifying those damages.

This decision also serves as a reminder to employers that employees may be entitled to certain benefits or payments after their termination, even if they have been summarily dismissed. In particular, post-termination payments in consideration for compliance with post-employment restrictive covenants may be payable, even if the employee breached other contractual obligations during the period of their employment.