Sunrise Brokers LLP v Rodgers – High Court enforces restrictive covenants against broker

In this post, specialist employment solicitor Chris Hadrill will examine the recent High Court case of Sunrise Brokers LLP v Rodgers [2014] EWHC 2633 (QB), a case involving the immediate resignation of a broker (Mr Rodgers) from his employment with a firm of London brokers (Sunrise Brokers LLP) and his subsequent employment by a competitor, which Sunrise contended was in breach of Mr Rodgers’ contract of employment.

The facts of Sunrise Brokers LLP v Rodgers

Mr Rodgers started work for Sunrise Brokers LLP as a derivatives broker in 2009. He transferred over the Precious Metals Desk of Sunrise Brokers LLP in October 2011 and signed a new contract of employment, under which Mr Rodgers could not give notice of his resignation from until 22 September 2014 and, from that date, had to give 12 months’ prior written notice of his resignation (so his employment effectively could not end until at least 22 September 2015 under the terms of the contract). Mr Rodgers was also subject to certain restrictive covenants under his 2011 contract of employment, including non-compete covenants as well as non-dealing covenants.

On 9 February 2014 Mr Rodgers – unbeknownst to Sunrise – agreed to join a competitor of Sunrise’s, EOX Holdings LLC (“EOX”), as a derivatives broker in New York, with his employment to commence on 1 January 2015. Mr Rodgers’ job at EOX involved a substantial increase in salary, as well as a potentially lucrative entitlement to any commission generated. In breach of his contract of employment, Mr Rodgers did not inform Sunrise of this at the time. Further, he also supplied (again, in breach of contract) confidential client lists to a third party, as well as taking a screenshot from his work computer showing the figures for the last quarter’s business on Sunrise’s Precious Metals Desk. Having done that, Mr Rodgers went to the office of one of the directors of Sunrise on 27 March 2014 and informed him that he was resigning without notice from his position at Sunrise. After this he did not return to work at Sunrise, although Sunrise attempted to persuade him to do so (with such persuasion including the offer to reduce his notice period so that his notice would expire on 16 October 2014). After it became clear that Mr Rodgers was not prepared to continue working for the business Sunrise stopped paying him his salary and bonus in April 2014.

Sunrise subsequently discovered that Mr Rodgers was intending to commence employment with EOX. The firm therefore took steps to apply to the High Court to compel Mr Rodgers to comply with the terms of his contract of employment and to remain at Sunrise as an employee until the reduced period of notice was to expire on 16 October 2014. Further, it sought to obtain an injunction preventing Mr Rodgers from working for EOX thereafter until his restrictive covenants expired on 17 April 2015.

Mr Rodgers, for his part, claimed that Sunrise was in repudiatory breach of contract by failing to pay him his wages from April 2014 and that he was therefore released from his restrictive covenants under his contract of employment. Further, he also claimed that Sunrise should not be legally entitled to force him to remain in employment until 16 October 2014 and that the effect of the restrictive covenants should only last until 26 September 2014 (as his last contact with any clients was on 27 March 2014, six months before this date).

The judgment of the High Court in Sunrise Brokers LLP v Rodgers

The High Court rejected Mr Rodgers’ argument that the failure to pay him constituted a repudiatory breach of contract as the obligation to pay an employee is reciprocal to the employee’s willingness to undertake any work provided by the employer. Mr Rodgers had made it very clear that he would not return to Sunrise whatever the circumstances and, as he was not willing to return to work, Sunrise therefore had no obligation to pay him. Equally, the fact that the non-performance of one obligation (the employer’s duty  to pay the employee) excuses the non-performance of the other (the employee’s duty undertake work provided by the employer) does not mean that the contract of employment ceases to exist if those duties aren’t performed. The court therefore held that Mr Rodgers was still employed by Sunrise and would remain so until the agreed period of notice expired on 16 October 2014.

The court then went on to consider whether the various terms of Mr Rodgers’ contract of employment with Sunrise (notice period, restrictive covenants) could be enforced by injunction.

Notice period

Under the terms of Mr Rodgers’ contract with Sunrise, he was prevented from taking work of any kind during his notice period. However, HHJ Mr Richard Salter QC found that this would be not be an appropriate order to make and made an Order that he would refrain from working for EOX or any other similar competing firms until his notice period expired on 16 October 2014.

Restrictive covenants

Under the terms of Mr Rodgers’ contract of employment with Sunrise, he was prevented from joining a competitor of Sunrise’s or soliciting any of Sunrise’s clients for a period of 12 months from the date of the termination of his employment (16 October 2014 in this case). HHJ Mr Richard Salter QC declined to make an Order in those terms but instead – given that Mr Rodgers had been absent from Sunrise for a period of four months already – made an Order that the restrictive covenants should apply for 10 months from the date of the last client contact. An Order was therefore made that the restrictive covenants should take effect until 26 January 2015.

Our view on Sunrise Brokers LLP v Rodgers

In our opinion, the judgment of HHJ Mr Richard Salter QC is impressive both in its thoroughness and reasonableness – the High Court appears to have reached an eminently reasonable compromise between protecting the legitimate interests of Sunrise and ensuring that Mr Rodgers did not escape from the legal consequences of his actions. In particular, the court appears to have dealt with particular skill with the issue of whether Sunrise was in repudiatory breach of contract by failing to pay Mr Rodgers whilst he was absent from work without leave.

The judgment of the High Court can be found on BAILII.