Ashurst Rowan Financial Planning v Hall concerned an employee whose employment contract contained a clause allowing the employer, during his 6 month notice period, to require him to do all or part of his normal duties or no duties at all. It was expressly stated that any period spent on ‘garden leave’ would be deducted from the period during which any restrictive covenant would otherwise be in force. The relevant restrictive covenant prevented him from competing with the employer for a period of 6 months following termination of his employment.
The employee resigned and was asked to report directly to the CEO and work mainly from home on the handover of his client work during his notice period. The employee claimed that this period amounted to garden leave and accordingly the length by which he was bound not to compete was reduced. The High Court disagreed. His employers expressly said he was not on garden leave and, on the facts, he was still working.
However, the non-compete clause was found to be void because it was too widely drafted, preventing him from working in any capacity for any business or activity which directly competed with his ex-employers.
Points to note –
- A provision for ‘garden leave’ at the end of a contract of employment is often a more useful contractual tool for employers than restrictive covenants which are void unless the employer can prove otherwise. Both provisions can be used but, as this case shows, they must be carefully worded in order to be effective.
- Restrictive covenants will only be valid to the extent that they protect ‘legitimate business interests’. These may include ‘trade connections’ which in turn may include ‘the names of customers and the goods which they buy’. Again, they must be very carefully worded as, if and when they are needed, they are likely to be challenged in court.