Can TUPE Be Used To Gain Freedom From A Garden Leave Clause?

An employee's bid to use an objection to a TUPE transfer to gain freedom from his lengthy garden leave clause failed in the recent decision of ICAP Management Services Limited v (1) Dean Berry and (2) BGC Services (Holdings) LLP). The case provides a useful reminder to employers of how employees can use the fact of a TUPE transfer to seek to get out of their contractual obligations.

Many employers need to protect their confidential information, client base, workforce and business from being either damaged or taken by a departing employee. To do so, employees can ensure that employment contracts allow them to: (i) put employees on garden leave during their notice periods and (ii) to restrict their activities after the end of their employment.

To be enforceable, the limitations on the employee's activities must go no further than is reasonably necessary to protect the employer's legitimate business interests, as we've previously explained here and here.

So far, so good, but employees are often reluctant to delay starting working for a new employer, particularly when there is a long notice period and they have been placed on garden leave to keep them out of the business. There are two key ways in which employees may try to extract themselves from the application of garden leave clauses and/ or restrictive covenant

Relying on a breach of a term of the employee's contract: if an employer commits a serious breach of the employee's contract (whether of an express or implied term) and the employee accepts the breach (e.g. by resigning), then the employee will no longer be bound by the terms of the employment contract, including garden leave provisions and post termination restrictions. Objecting to a TUPE Transfer: where there is a transfer of an undertaking or business, or a service provision change within the scope of the TUPE Regulations, an employee assigned to that undertaking or the activities being transferred will also transfer to the new employer. However, employees have the right to object to the transfer, which means that their contract of employment will be terminated on the transfer date but the employee will not be treated as having been dismissed. This does not release the employee from post termination restrictions, but provides an early release mechanism for an employee who wants to avoid having to serve out a notice period. Employers may be familiar with the first scenario, but employees taking advantage of a TUPE transfer to...

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