By Nic Hart
The Queen’s Bench Division of the High Court have held in Square Global Limited v Leonard that the absence of a garden leave set-off clause will not be fatal to a non-compete post termination restriction, touching on a the widely debated relationship between garden leave and non-compete clauses in employment contracts.
The case involved an employer’s attempts to enforce periods of garden leave and subsequent non-compete restrictions on an employee consecutively. The employee in question had resigned and in response claimed constructive dismissal on the basis that his employer had destroyed or seriously damaged the necessary relationship of trust and confidence between the parties, in breach of the implied term in the contract of employment. The High Court held on the facts that the employee was not entitled to resign summarily and by doing so, he had failed to give six months’ notice of termination and was in breach of his employment contract.
The employer sought to enforce a period of garden leave reflecting the six months contractual notice from the date of resignation, in addition to a further six months’ protection from the end date of that notice period on 11 May 2020 under the non-compete clause in the employee’s contract. This would effectively afford the employer a total of 12 months protection. The High Court were satisfied that the six month non-compete clause was pursuant to the employer’s legitimate business interests capable of requiring protection by restrictive covenants, and was reasonable, going no further than necessary to protect the employer’s legitimate business interests.
The High Court then went on to assert as follows:
“The garden leave clause which is included in the contract exists to cater, among other matters, for a situation where [the employer] has concerns about an employee’s conduct (e.g. harvesting client information, or engaging in deceptive behavior), and so chooses to restrict the employee’s duties during the notice period. On the assumption that such concerns have reasonable foundation, it would not then be unreasonable to enforce the full period of the post termination restrictions.” (Paragraph 191)