Standard Life Health Care Limited v Gorman and others 2009 EWCA Civ 1292

Mr Gorman and his fellow employees were prevented by an injunction from joining a competitor for the duration of their notice periods even though there was no express garden leave clause in their contracts of employment. The court held that Standard Life was able to rely on the suspension clause to keep the employees from attending work.

Mr Gorman was paid on a commission only basis. He and others resigned from Standard Life to join a competing medical insurer. Standard Life suspended them for the duration of their notice because it believed the employees to be in breach of contract. An injunction was obtained against each employee restraining them from selling private medical insurance for anyone other than Standard Life for the duration of their notice periods. The effect of the suspension and injunction was that they could not earn any money from their current employment or from their new employment. Their appeal was unsuccessful, the Court of Appeal finding that the balance of convenience clearly favoured the continuation of the injunction.

The employees were held to have breached their duty of good faith and therefore the employer was released from its obligation to provide work to them even though the contract of employment continued and there was no express garden leave clause. The court took into account the fact the employees were fully aware of the potential consequences of their actions when they decided to register to work as appointed representatives of the new employer. It was also noted that the employees had received both lump sum payments and ongoing financial compensation from their new employer for the period they had not been able to work for either company.

Key point: Employers should where possible, have an express right to place key employees on garden leave in their employment contracts.