In November 2013, the English High Court held in JM Finn & Co Ltd v Holliday ( EWHC 3450) that a garden leave covenant of 12 months' duration was reasonable in circumstances where a client base needed to be secured.
Holliday had been employed by stockbroking firm, Finn & Co, as an investment advisor from 1999 until his resignation in July 2013. In his role, Holliday managed investment funds of £200m. Following his resignation, Finn & Co exercised an express contractual right to place Holliday on garden leave and sought to hold him to his 12 month notice period which he had agreed in 2008 when his salary was tripled.
Within a month of having been placed on garden leave, Holliday resigned summarily relying on an alleged repudiatory breach of contract by Finn & Co, and, as such, he considered himself free to commence his new employment. Finn & Co obtained an interim injunction enforcing the garden leave and notice period when Holliday refused to assure Finn & Co that he would not take up new employment.
At the full trial, the High Court extended the injunction until the expiry of Holliday’s 12 months’ notice period in July 2014. This was considered to be no more than was necessary to protect Finn & Co’s legitimate business interests in connection with its clients. The court held that garden leave in this context had to be justified on similar grounds to those applicable to a restrictive covenant because long periods of garden leave were capable of abuse. Finn & Co required a reasonable period within which to establish a relationship between the clients and a new investment manager. The court considered that Holliday’s skills would not diminish over the course of the notice period. As Holliday was to be paid his full salary and benefits, he would suffer no financial loss. It was therefore deemed that 12 months was a reasonable time for the firm to establish itself with Holliday’s client base.
This follows a UK court's decision in Romero Insurance Brokers Limited v Templeton earlier in 2013, in which it was held that a 12 month non-solicitation period for an insurance broker was enforceable, based on the typical 12 month renewal cycle in many insurance contracts. Both cases would have persuasive authority in Ireland. As such, employers should note these recent developments.