12 Months Garden Leave Enforced by way of Injunction

The High Court has granted an injunction to enforce a 12 month garden leave clause.

In JM Finn & Co Ltd v Holliday, H was an investment manager earning £120,000 and was subject to a 12 month notice period. His employment contract contained an express provision allowing his employer to put him on garden leave during the notice period and express non-solicitation provisions during garden leave. When he resigned to take up a role with another stockbroker, he was placed on garden leave and reminded that he must not contact clients.

H sought to join a competitor and his employer applied for an injunction to prevent him doing so and to prevent him contacting clients during the 12 month garden leave period. The injunction was granted.

In considering whether to grant an injunction, the court looked at what was required for the reasonable protection of the employer’s client base. It accepted that forging a relationship with a client takes time and noted that formal contact with clients occurred only occasionally. The employer would therefore need a reasonable time to establish relationships between clients and new investment managers. It also accepted that there was a strong risk H would be able to “woo” many of the clients if he had access to them in the short-term.

The court considered that a 12 month injunction would not cause disproportionate harm to H. He was being paid salary and benefits and so suffered no financial loss. It was not suggested he would lose his new job and the court did not believe his skills would diminish as he would have time to maintain his market knowledge whilst on garden leave.

The court rejected H’s contention that a 12 month injunction would disadvantage clients. They could use other stockbrokers in the meantime before transferring to H at the end of his notice period. The fact that H believed clients would remain loyal to him was a reason why his employer should have the opportunity to retain them.

A court will only grant an injunction to enforce garden leave provisions where the employer is seeking to protect a legitimate interest, such as its client base and then only for so long as is reasonable to protect that interest. In this case, the court was persuaded to grant an injunction covering the full 12 month notice period which is perhaps unusual. The court was influenced by the fact that H clearly had strong relationships with his clients and commanded loyalty from them. As client contact only occurred occasionally and forcing early communication could prove counter-productive, the court was prepared to accept that the new investment manager would need this time to forge links with H’s clients.