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Title:
All Bets are off – The Future of Garden Leave After
William Hill v Tucker

14 April 1999

Paul Goulding was called to the Bar in 1984, after graduating with an MA and BCL, and then teaching, at Oxford. He practises at Blackstone Chambers (formerly known as 2 Hare Court) headed by Presiley Baxendale QC and Charles Flint QC. His main areas of practice are employment law, sports law, financial services and judicial review. Leading employment cases in which he has appeared include Biggs v Somerset CC [1996] ICR 364 (CA), Credit Suisse Asset Management Ltd v Armstrong [1996] IRLR 450 (CA), Harrods Ltd v Remick [1997] IRLR 583 (CA), Coker v Diocese of Southwark [1998] ICR 140 (CA), and Secretary of State for Education v Bearman [1998] IRLR 431 (EAT). Recently, he acted for the Dean of Westminster Abbey in the appeal brought by the dismissed organist, Martin Neary. He is currently Chairman of the Employment Lawyers Association.

This paper was delivered to the Industrial Law Society on 14 April 1999, and is available on the Blackstone Chambers website, which can be found at www.blackstonechambers.com.

Paul Goulding
Blackstone Chambers
Blackstone House
Temple
London
EC4Y 9BW
DX:LDE 281 (London)

Tel:0171 583 1770
Fax:0171 822 7222
E-Mail:paulgoulding@blackstonechambers.com

INTRODUCTION

The title of my talk this evening is garden leave. The immediate backdrop is the Court of Appeal decision, given a year ago this month, in William Hill v Tucker (1). It is an important case. It has significant implications not only as far as garden leave is concerned, but also for employment law generally. In short, the Court concluded that the employee in question, Mr Tucker, had a "right to work". I want to spend some time examining what the case decides, what lessons we can learn, and what questions are left unanswered by the decision.
But it is the wider picture, which this case so vividly illuminates, which provides a more interesting and inviting subject for consideration. To ignore it would be to neglect the real significance of the William Hill case.

By the wider picture I mean the influence of social and economic ideas on the development of employment law. Because it is arguable – and I shall endeavour to develop the argument – that the approach of the Court of Appeal in William Hill demonstrates with great clarity the abiding importance of judicial views on political and social economy. This is because the doctrine of restraint of trade, which is central to this particular case, is founded on public policy. What public policy is at any point in time has to be interpreted by the judges. Once interpreted, its application in any particular case strikes a balance between the power of the employer and the employee. What the Court of Appeal has achieved in William Hill is to shift the balance of power away from employers and in favour of employees. This then raises profound questions: Do the judges acknowledge that they have this power? If so, how do they go about exercising it? And what are the prospects for its exercise in the future?

One thing is sure, and that is that public policy, and judicial perceptions of it, are not immutable. This was recognised by Lord Watson in the Nordenfelt case, which remains to this day the locus classicus of restraint of trade cases. He said :

A series of decisions based upon grounds of public policy, however eminent the judges by whom they were delivered, cannot possess the same binding authority as decisions which deal with and formulate principles which are purely legal. The course of policy pursued by any country in relation to and for promoting the interests of, its commerce must, as time advances and as its commerce thrives, undergo change and development from various causes which are altogether independent of the actions of its Courts. In England, at least, it is beyond the jurisdiction of her tribunals to mould and stereotype national policy. Their function, when a case like the present is brought before them is, in my opinion, not necessarily to accept what was held to have been the rule of policy a hundred or a hundred and fifty years ago, but to ascertain, with as near an approach to accuracy as circumstances permit, what is the rule of policy for the present time. When that rule has been ascertained, it becomes their duty to refuse to give effect to a private contract which violates the rule and would, if judicially enforced, prove injurious to the community. (2)

There is another recent decision of the Court of Appeal in this field where a judge's perception of changing conditions in society has led to a major rethinking of legal principle. In Rock Refrigeration Ltd v Jones (3), the Court of Appeal was called upon to consider whether the rule in General Billposting (4)is still good law, namely that an employer is unable to enforce post-termination restrictive covenants against an employee who has accepted the employer's repudiation of the employment contract. Whilst the majority endorsed the rule in General Billposting, Phillips LJ concluded that the rule accords neither with current legal principle nor with the requirements of business efficacy (5). The Judge perceived that there had been changes in both.
Similarly, it is a perceived change in public policy which lies at the heart of the Court of Appeal's approach in William Hill. Having considered a number of cases decided in the first half of the twentieth century, in which it was held that there was no right to work, Morritt LJ continued:
But as social conditions have changed, the courts have increasingly recognised the importance to the employee of the work, not just the pay(6).

This short statement is replete with significance. It admits the relevance of social conditions in shaping the law. It acknowledges that social conditions have changed. It declares that the courts have moulded the law to reflect those changed social conditions. It presupposes the validity of such an approach.

In fact, changed social and economic conditions have brought about significant reinterpretations of the doctrine of restraint of trade over many years, as we shall see in a moment. Perhaps what is refreshing about Morritt LJ's approach is his candour in acknowledging the judicial role in this area, which is to recognise and reflect changing social conditions as an important element in any legal analysis. But what is perhaps most significant about this statement is that Morritt LJ identifies the changed social conditions as having shaped the law for the benefit of employees at the expense of employers.

1. Historical Development of the Doctrine

The doctrine of restraint of trade can be traced back many centuries. Professor Wedderburn observes in The Worker and the Law (7), that the roots of these common law principles governing contracts lie deep in the individualist concepts of laissez-faire and doctrines of even earlier vintage to resist monopoly. He adds that they are part of a wider public policy that can strike down a contract as involving servitude or slavery, though this is rarely done. He gives as an example the case of a debauched son who in 1919 was bound by contract to transfer all his property to his father and avoid his friends, to stop excessive borrowing or drinking, and never to go within eighty miles of Piccadilly Circus. The judge found that this was not servitude on the ground that it was "not too wide having regard to the nature and extent of the mischief to be avoided".

In his masterful book, The Common Law of Restraint of Trade, Professor Trebilcock, writing in 1986 from a predominantly North American perspective, identifies three distinct phases in the historical evolution of the doctrine.

First, during the mercantilist era, the courts strove to resist the stranglehold on work and enterprise which was wielded by the medieval guilds and the Crown monopolies and corporations. Their principal tool was the doctrine that restraints of trade are illegal, being contrary to public policy. A thorough exposition of the law at the time was given by Parker CJ in the case of Mitchel v Reynolds (8), reported in 1711, who held all voluntary general restraints to be void, and partial restraints valid only to the extent that there was adequate and appropriate consideration. As Trebilcock observes, Parker CJ articulated for the first time the reasons why the rules were considered desirable from the standpoint of the public good: that is, the equitable imperative of protecting the right to work from abuse, and the economic benefits of preventing such abuses.

Secondly, the laissez-faire era saw the social, economic and demographic changes brought in by the industrial revolution. This carried with it a renewed battle between freedom of trade, on the one hand, and freedom of contract, on the other. In the end, the "will" theory of contract triumphed over the "equitable" conception of contract law. This changed approach was encapsulated in a dictum of Jessel MR in the 1875 case of Printing and Numerical Registering Co v Sampson, when he said:

If there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by the courts of justice. Therefore you have this paramount public policy to consider in that you are not lightly to interfere with this freedom of contract. (9)

According to Trebilcock, at the end of the laissez-faire era, the doctrine of restraint of trade had largely fallen into desuetude and, to some extent, disrepute. Restrictive covenants in employment and sale of business contracts were routinely enforced.

Trebilcock's historical analysis is completed by the modern era restraint of trade cases which, he argues, reflect changes in the conceptions of the equity and economic development principles in two major ways. First, the recognition that freedom of contract does not automatically promote either of these principles is reflected in a new willingness to consider explicitly the public policy implications of restraints of all kinds. As a result, the scope of the doctrine was extended beyond its traditional categories. Secondly, the reformulation of the two principles resulted in changes in the content of the doctrine. In general, the reformulated equity principle made the concern with inequality of bargaining power a central presupposition of the doctrine, at least with respect to employment contracts. The reformulated economic development principle led to a focus on dynamic and productive efficiency considerations as the basis for distinguishing "legitimate" from other promisee interests.

The paradigm statement of the doctrine during this period, the modern era, which has remained the starting-point for all subsequent considerations, is Lord Macnaghten's in Nordenfelt. He said:
The true view at the present time, I think, is this: The public have an interest in every person's carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade themselves, if there is nothing more, are contrary to public policy, and therefore void. This is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable – reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public. (10)

Hence, the two-limb reasonableness test was born: reasonable in the interests of the parties, and reasonable in the interests of the public.
Trebilcock, then, concludes that the common law doctrine of restraint of trade underwent very radical and systemic changes during the three phases of its existence but that a thread of continuity runs through this body of law. The thread is the underlying public purpose of the doctrine as a whole – that is, the protection of the individual's right to work – and the two values or principles which make that a desirable end: first, the value of equity or fairness with respect to the impact of a restraint on the party restrained; and, secondly, the value of economic development more generally. In his view, in each of the three major eras of the doctrine's development – the mercantilist, the laissez-faire, and the modern – the judicial conception of each principle differed significantly. It is the changes in these conceptions that explain the basic changes in the scope, and content, of the doctrine.

1. Analyses of the Doctrine
   

If Trebilcock is right in his historical analysis, and I find his argument both enlightening and compelling, then the picture that emerges is striking. For, the common law has, over at least four centuries, developed a doctrine which allows the courts to interfere with the freedom of contract and strike down agreements which have been reached between the parties even in the absence of traditional preconditions for intervention, such as fraud or misrepresentation. The two principles – and this is key - underlying the doctrine, according to Trebilcock, are the equity or fairness principle, and the economic development principle. The conceptions of these principles change from time to time but it is judicial conceptions that are all important.
Just to state the argument in this way is to demonstrate its great significance. Here is a common law interventionist tool, guided, at least in part, by what is conceived to be fair. That means, essentially, fairness from the employee's point of view. There is, accordingly, great scope here to regulate employment relations to the employee's advantage. Thus, the "right to work" in the sense in which we are discussing it this evening, and the protection of it, is an expression of the fairness principle underlying the doctrine of restraint of trade.

But, if that is so, what is remarkable is that so little attention has been paid to the role of the doctrine in modern-day employment law. The literature which charts the changes in public policy and employment law during the twentieth century pays little regard to the doctrine at least as it applies to individual as opposed to collective employment law. The practitioner-based literature, good as it is, treats the historical and ideological aspects of the doctrine with considerable brevity (11).

The only recent academic treatment is the one I have mentioned already by Trebilcock (12). But as the sub-title of his book - "A Legal and Economic Analysis" - suggests, Trebilcock is more concerned, at the end of the day, to test whether the common law doctrine is economically efficient rather than ideologically potent. And, as interesting as questions about the Pareto-efficiency of the doctrine of restraint of trade might be (let alone the Paretian question as modified by Kronman), it seems to me that there is a great need for a coherent exposition of the role, actual and potential, of the doctrine of restraint of trade in regulating the employment relationship. At least, in so far as the doctrine, and its twin principles of fairness and economic development, may be used to control the restrictions which the employment contract imposes on an employee's right to work.

1. Judicial Approaches to the Doctrine
   

It is perhaps the lack of a coherent legal framework for the doctrine of restraint of trade, in the context of the modern employment relationship, that has led to a differing approach on the part of judges to their role in applying the doctrine.

On the one hand, some judges have shown great reluctance to embark on any assessment of public policy. As Lord Campbell CJ said in 1855 in Hilton v Eckersley:

I enter upon such consideration [as to whether a contract is void as against public policy] with much reluctance, and with great apprehension, when I think how different generations of Judges, and different Judges of the same generation, have differed in opinion upon questions of political economy and other topics connected with the adjudication of such cases. (13)

[I]t is not for this tribunal, nor any tribunal, to adjudicate as between conflicting theories of political economy. Strong views may be entertained on the one side or on the other, but the one material question is whether the monopoly or control is of such a nature as to be contrary to the public interest. (14)

But, it has been argued that this statement gives expression to a widespread judicial illusion since judges, particularly in this field, have often taken sides on economic issues, though often unconsciously and mostly in the form of improvised and unscientific theories. (15)
Not all judges have adopted this approach, however. Some have shown themselves willing to embrace competing economic and fairness considerations in determining the scope and content of public policy. For example, Blair JA in the Ontario Court of Appeal eschewed the idea of treating public policy as a rigid legal formula. He said:

Restricting consideration of the public interest to economic and social effects which in some fashion have acquired the status of legal dogmas, might result in the doctrine losing its utility as a valuable instrument for adjusting this branch of the law to changing economic and social conditions. (16)

It may be that in the UK, as the judges increasingly recognise the political and economic dimensions of their decisions, a recognition hastened by the advent of the Human Rights Act, that greater expression will be given to such considerations in the restraint of trade field. The acknowledgement by Morritt LJ in William Hill of the impact on the law of changing social conditions with regard to work is an encouraging pointer in this direction.

1. The Underlying Problem
   

Garden leave emerged in response to a particular problem faced by employers, and the common law's initial inability to provide a solution.
The particular problem arose when an employee, who had entered into a contract of employment for a minimum period of time (whether for a fixed term or indefinitely, terminable only on specified notice), indicated his intention to leave before the lawful expiry of the contract. Furthermore, he planned to join a competitor. The employer was unable to find a replacement quickly enough, and faced a loss of clients to the competitor, and possibly also a misuse of his confidential information.
The employee, if he carried out his intention, would clearly be acting in breach of contract. But what could the employer do? Damages would be difficult to quantify, and proceeding to trial would be costly, time-consuming and unattractive. An injunction seemed the ideal remedy. But here he was met with the rule that a court will not by injunction specifically enforce a contract of personal service. And if the result of restraining the employee from joining the competitor was that he would be compelled to return to work for his employer, this would amount to indirect specific performance of the employment contract, and so no injunction would be granted.

Gradually, the law developed a number of exceptions to this general rule. First, if the employee was able to find alternative employment, not in a competitive field, an injunction might be granted to stop him joining a competitor. In that case, indirect specific performance of the contract was not a danger(17). However, in reality, if a defendant wished to pursue his chosen profession, and could not join a competitor, he may have little freedom of choice but to go back and work for his employer, as was recognised in later cases.(18)

A second exception arose when the employee was content to continue working for the employer so that trust and confidence had not broken down. In that case, an injunction against joining the competitor might be granted because the continuance of employment with the employer was brought about not by the injunction but by the employee's voluntary consent (19).

1. The Garden Leave Solution
   

But none of these exceptions addressed the problem where the employer wished to stop the employee joining the competitor until the expiry of his notice period, and, at the same time, stop him coming in to work. The last thing the employer wanted was for the employee to continue to have access to clients, fellow employees or confidential information. The employer wanted to impose a period of leave; the employee could spend more time in his garden. In order for an injunction to be granted in this situation, the employer generally has to give two undertakings to the court in addition to the usual undertaking in damages: first, to continue to pay the employee all his contractual pay and other benefits during the notice period; and, secondly, not to seek to recover those sums from him on account of his failure to work. Thus, the employee would not be compelled to continue working for his employer, so there was no indirect specific performance of the contract.
Before William Hill, there was a trilogy of important reported cases which grappled with the availability of injunctive relief to enforce a period of garden leave.

In Provident Financial Group Plc v Hayward (20), the employee was required to give six months' notice of termination. Having resigned, he worked for two months, when his employers requested him to stay away from work. Six weeks later, that is with about ten weeks of his notice period remaining, he announced his intention immediately to join a competitor. The employers failed to obtain an injunction. The reason was that there was no real prospect of serious or significant damage to his employers from the employee working in the particular role that he was to take up with the competitor for the balance of the notice period. Thus, the injunction was refused as a matter of discretion. Nonetheless, there are a number of interesting features of the case of general importance. First, there was an express garden leave clause in the contract of employment, providing that the employer was under no obligation to provide the employee with work. Hence, no question of the employee's implied right to work, nor of a breach of that implied right, arose. Secondly, the Court of Appeal affirmed the availability in principle of injunctive relief to restrain an employee joining a competitor before the expiry of his current contract which, if carried out, would amount to a breach of the implied duty of good faith. Thirdly, the Court recognised that the practice of long periods of garden leave is obviously capable of abuse, a topic to which I shall return.

GFI Group Inc v Eaglestone (21), the second case in the trilogy, concerned a foreign exchange options broker who wished to join a competitor before his 20 weeks' notice period had expired. An injunction was granted for 13 weeks. This was explained by Holland J on the ground that two other employees had already lawfully joined the competitor (they had shorter notice periods) and, therefore, the damage which might be caused by the defendant joining them prematurely had already been done. Interestingly, there was no garden leave clause contained in the contract, but it does not appear to have been argued for the employee that the period of enforced garden leave amounted to a breach of his implied right to work.

In Euro Brokers Ltd v Rabey (22), which completes the trilogy, Robert Reid QC (sitting as a Deputy Judge of the High Court) was confronted with a money broker who wished to resign immediately to join a competitor in breach of a six months' notice provision. The judge granted an injunction restraining the employee's breach and, in effect, putting him on six months' garden leave. What is of greatest interest about the case, for present purposes, is the argument on the part of the employee that the opportunity to work for his employer during the notice period was a prerequisite of obtaining an injunction (23). There was no garden leave clause in the contract of employment. On this point, the Judge concluded that idleness (resulting from lack of work) may be a factor in determining whether an injunction is appropriate, but was not a decisive factor. There was no consideration of the cases where a right to work had been implied into a contract of employment, nor of the principles on which this implied right might be founded. However, two features may distinguish Rabey on this point: first, a certain period of garden leave was accepted as valid on the employee's behalf in any case –making it difficult to maintain that a longer period of garden leave offends the right to work; and, secondly, research work, at least, had been made available to him, if he wished to take it.

By the mid-1990s then, the garden leave injunction had been recognised by the courts as a legitimate form of relief in appropriate cases, and it had become well-established in practice. Battles in the courts tended to concern the appropriate period of the injunction, with the employee arguing, generally without success, that if kept out of work for the period sought by the employer then his skills would atrophy and he would thereafter be irremediably damaged in the job market. Occasionally, an employee, not subject to an express garden leave clause, argued that to put him on garden leave amounted to a breach of his implied right to work, and hence a repudiation of the employment contract which, upon his acceptance, allowed him to join a competitor. This argument generally met with short shrift at the interlocutory stage, such a response being fortified by Robert Reid QC's rejection in Rabey of the argument that the unavailability of employment was fatal to the grant of a garden leave injunction. And that is how the law stood when Mr Tucker fell out with William Hill.

1. The Facts
   

First, the facts. Pioneered in 1980, and initially confined to betting on changes in the financial indices, spread betting had, by 1984, been extended to sporting events. A bookie quotes a spread. The punter bets on whether the variable in question will come to more or less than the spread. Lord Justice Morritt explained:

"Suppose a bookie quotes a spread of 300 to 320 goals in the world cup finals. A person who thinks there will be more than 320 goals scored buys; one who doubts that 300 will be scored sells. The stake wagered is £x per goal. If 280 are scored on a £1 stake the latter person wins £20, the former loses £40".

Five companies offered spread betting. William Hill Index Limited was one for which Mr. Tucker worked as a senior dealer. He was required to give six months' notice of termination. On 2 February 1998, Mr. Tucker purported to resign on one month's notice in order to join City Index, one of William Hill's rivals in spread betting. William Hill replied that six months was required, they confirmed that Mr. Tucker was not required to attend work, that he would receive his salary and other contractual benefits (including a bonus), and they reminded him of his continuing duty of good faith as an employee.

When this letter failed to have its desired effect, William Hill applied for an injunction to restrain Mr. Tucker from joining a competitor until the expiry of his notice period, namely 1 August 1998. The Judge (James Goudie QC sitting as a Deputy Judge of the High Court) refused the application. He concluded that the employer was under an obligation to provide work to the employee which it did not do, entitling the employee to accept this repudiatory breach and bring the contract to an end. William Hill appealed to the Court of Appeal (Morritt, Robert Walker and Stuart-Smith LJJ).

1. The Issue
   

"When an employee has given notice to determine his contract of employment, may his employer, whilst continuing to pay his remuneration, insist that he stay away from work for the duration of the notice period, colloquially known as sending him on garden leave? It is not disputed that he may do so if there is an express contractual power to that effect. The issue on this appeal is whether, in the absence of such a term, the employer was entitled to do so in the circumstances of this case."

1. The Decision
   

The Court of Appeal rejected Williams Hill's appeal. The only reasoned judgment is given by Morritt LJ with whom the other two judges agreed. The Court of Appeal's decision may be examined in four stages.

First, the Court considered what it described as the broad proposition. The basis for the first instance Judge's decision was that there was a duty on the part of the employer to provide a skilled employee with work and the opportunity to exercise his skills save where there is an express or implied right not to do so. The Court of Appeal rejected that broad proposition. It was not supported by either party in the Court of Appeal and the Court accepted that there is no general right to work in the terms which it appeared was suggested by the Judge.

Secondly, the Court identified the proper approach to be adopted in a case of this nature. The question whether there is a right to work is one of construction of the particular contract which has to be undertaken in the light of all the surrounding circumstances. The crucial question, said the Court, is: what is the consideration moving from the employer under the contract of employment? Or, to put it another way: under the contract which has been entered into, what does the employer agree to do? Does the employer agree only to pay a salary or does he undertake an obligation in addition to provide a reasonable amount of work? That is the crucial question to be answered based on the terms of the contract in the light of all the surrounding circumstances.

The third stage of the Court's judgment involves a consideration of the established categories of situation which fall on one side or the other of this dividing line between cases where the employee has a right to work and those where he has not. Thus, certain situations have been well recognised by the courts as giving rise to an obligation on the part of the employer to provide work. For example, actors, who need to exercise their skills and gain publicity. Likewise, those engaged in specific projects such as employment on a particular voyage; or, where remuneration depends on the employer providing the employee with an opportunity to work, for example if payment is based on commission. Those are the sorts of cases where the courts, in the past, have often said that there is a right to work and there is nothing in William Hill to suggest that that approach has changed.

What about the other side of the dividing line? The courts have previously shown a marked reluctance to find an obligation to provide work in cases where an employee is engaged on an indefinite contract with a fixed wage or salary with no remarkable features such as those I have just mentioned. For example, sales reps, domestic servants, and the like have not in the past enjoyed a recognised right to work. It is this category of case which now needs to be re-examined in the light of William Hill.

But it is this new approach which forms the fourth and most important part of the Court of Appeal's decision. The Court begins by recognising the changed social conditions in which we live. It acknowledges that the courts have increasingly recognised the importance to the employee of the work, not just the pay. This, according to Morritt LJ, can be traced back to the 1974 case of Langston v AUEW. There, Lord Denning MR said that it was arguable that:

a man has by reason of an implication in the contract a right to work. That is he has a right to have the opportunity of doing his work when it is there to be done. (24)

Cairns LJ thought it arguable that the contract of employment gave the employee "a right to attend normally at his place of work" (25). Stephenson LJ likewise recognised that the employee might be able to show that:

he has a right to work out any notice which he may be given, that it is his employer's duty to allow him to exercise that right by providing him with the work, and that by continuing to suspend him on full pay, as they are doing, they are in breach of their contract of employment with him.(26)

Echoes of this approach were said to be found in Provident Financial Group v Hayward, although, as Morritt LJ recognised, the question did not arise in that case given the existence of a garden leave clause in the contract.

These changed social conditions must, the Court says, inform the legal approach to be adopted. But there are limits to this new approach. It was not suggested that there is an obligation to find work if there is none to be done, or none which can be done with profit to the employer. Nor is it said that the employer is bound to allocate work to the employee in preference to another employee if there is not enough for both of them. But, what the courts are now prepared to do, according to the decision in William Hill, is to find that there is a right to work in certain situations where previously there was no such right. Of course, the critical point of interest is how do you distinguish the situations where now there is a right to work from those where there is not. The Court of Appeal in William Hill points to three factors which supported a right to work in that case.

• The first fact?74444ractice to stay at concert pitch but Morritt LJ had little doubt that frequent and continuing experience of the spread betting market - what it would bear and the subtle changes it goes through - is necessary to the enhancement and preservation of the skills of those who work in it.
  
• Thirdly, the terms of the contract itself. The contract provided for the hours and days of work, and specifically imposed on the employee the obligation to work those hours necessary to carry out his duties in a full and professional manner. If work was available, the Court concluded, it was inconsistent with that provision if the employee was entitled or bound to draw the remuneration without doing the work. In addition, there was an express right of suspension, limited to cases where more time is required to investigate serious allegations of breach of discipline or security. This express term would be unnecessary if there was an implied right to place an employee on garden leave. Further, if the employer were entitled to keep its employee in idleness, the investment in its staff (which was a commitment referred to in the staff handbook) might be as illusory as the limited power of suspension would be unnecessary.
  

These aspects of the new approach led the Court to the conclusion that on the proper construction of the particular contract of employment in question, the employer was under an obligation to permit Mr. Tucker to perform the duties of the post to which it had appointed him in accordance with his contract as well during the period of his notice as before it was given. This marks a significant departure from the previous approach of the Courts and tips the scales in the employee's favour.
It is arguable that the Court of Appeal in this case adopts a more interventionist role in applying the restraint of trade doctrine, as did the courts during the mercantilist era, in order to protect the employee's right to work. Although Morritt LJ states the proper test, for ascertaining whether there is a right to work, to be one of the construction of the contract in the surrounding circumstances, he is also clearly influenced by changing social conditions which recognise the importance of work. Arguably, his approach demonstrates the influence of the fairness principle which underlies the restraint of trade doctrine, namely that the courts may and, in appropriate cases should, intervene to protect an employee from unfair interference with his right to work.

1. The Right to Work
   

First, how widespread is this right to work? As we have seen, the Court of Appeal identified the proper approach to the issue of whether an implied right to work exists as a question of the construction of the particular employment contract in the light of all the surrounding circumstances. Putting aside for one moment whether this is the most appropriate test to be applied, a moment's reflection reveals, I would suggest, that the result of the way in which the test was applied in William Hill is that the right to work is more widespread than might at first be imagined.
It will be recalled that Morritt LJ identified three features of Mr Tucker's contract and circumstances which supported the existence of the right to work in his case. The first is that Mr. Tucker was in a specific and unique post. But it could be argued for a great number of people who hold positions of any seniority or importance that their post is specific and unique in substance as well as in form. Secondly, it was said by the Court of Appeal that the skills necessary to the proper discharge of Mr Tucker's duties as a senior dealer in spread betting required their frequent exercise. But that argument can apply with equal force across a whole range of skills and jobs. Thirdly, the Court relied upon the terms of the particular contract. However, very many if not most written contracts these days identify specific hours and days of work, impose on the employee an obligation to carry out his duties in a full and professional manner, provide a limited power of suspension, and staff handbooks often contain some generalised reference to the employer's investment in staff.

Therefore, any senior employee who is the sort of person whom an employer is likely to want to stop joining a competitor in breach of contract, will frequently satisfy these criteria, with the result that he enjoys a right to work. If that is correct, and there is no express garden leave clause, then it is in the very type of case where the employer most needs an injunction that he will least be able to obtain one. A more junior employee is far less likely to satisfy these criteria and will not, therefore, have a right to work. In such a case, a garden leave injunction would more likely be granted but that is the sort of case where the employer is least likely to want to stop the employee joining a competitor in the first place. This clearly has major implications for employers and employees.

1. Garden Leave Clauses
   

Secondly, one of those implications is that the case emphasises the importance of including an express garden leave clause in contracts of employment. Given that the range of contracts where the courts will imply a right to work has increased, correspondingly there is a greater necessity from the employer's point of view for an express garden leave clause. As Morritt LJ stated (27), in practice an employer will need to stipulate for an express power to send his employee on garden leave in all cases in which the contract imposes on him an obligation to permit the employee to do the work.

Given the potentially widespread nature of the right to work as a result of this decision, what emerges, as I have mentioned, is that, absent an express garden leave clause, it will be considerably more difficult to obtain a garden leave injunction in the very type of case where one is needed. It, therefore, behoves employers and their advisers to review their employment contracts and, where necessary, amend them to include a garden leave clause. It provides employees and their advisers with a further shield to ward off attempts to limit their freedom to work.

1. Limits to Garden Leave
   

But thirdly it is important to remember that even where you have an express garden leave clause, it is necessary to go further in order to obtain a garden leave injunction. It is not enough to point to the garden leave clause and obtain an injunction as of right. As we have seen, Provident v Hayward is an early illustration of this where the absence of real or substantial damage to the employer from the threatened competitive activity tilted the balance against the grant of an injunction in the exercise of the court's discretion.

However, it is clear that an employer must show more than real or substantial actual or threatened harm. In fact, an employer must approach the matter in the same way as he would in seeking to enforce a post-termination restrictive covenant. Morritt LJ noted that there appears to be a trend towards increasing reliance on garden leave provisions in preference to conventional restrictive covenants, no doubt, he thought, because the courts have treated the former with greater flexibility than the latter. He continued:

But the reported cases dealing with the court's approach to the grant of injunctions in this field show that if injunctive relief is sought, then it has to be justified on similar grounds to those necessary to the validity of an employee's covenant in restraint of trade. It seems to me that the court should be careful not to grant interlocutory relief to enforce a garden leave clause to any greater extent than would be covered by a justifiable covenant in restraint of trade previously entered into by an employee. (28)

1. Abuse of Garden Leave
   

One issue to which the courts have alluded, but which has not yet been explored to any degree, is the potential for an employer to abuse garden leave protection. This can arise, and is most likely to arise, where an express garden leave clause is contained in the contract. Assume a fixed-term contract with a long unexpired term, or a contract with a long notice period. Perhaps the relationship between employer and employee has broken down. The employee wishes to leave to join a competitor. The employer puts the employee on garden leave, keeping him away from work and clients, and denying him the opportunity to exercise his skills. When the employee complains about the deprivation of work, the employer points to a garden leave clause in the contract as justification for taking these steps. There can be no implied right to work, since this would be inconsistent with the express garden leave clause. The employer is apparently acting entirely in accordance with his contractual obligations.

This problem was first recognised by Dillon LJ in Provident v Hayward. It will be remembered that there was an express garden leave clause in that case and this, according to Dillon LJ, gave the case a wider importance. Such clauses, he noted, are imposed on many senior executives and it may be that such executives are hardly in a position to negotiate over the terms of their contracts of service. He then identified a potential vice:

The practice of long periods of "garden leave" is obviously capable of abuse. It is a weapon in the hands of the employers to ensure that an ambitious and able executive will not give notice if he is going to be unable to work at all for anyone for a long period of notice. Any executive who gives notice and leaves his employment is very likely to take fresh employment with someone in the same line of business not through any desire to act unfairly or to cheat the former employer but to get the best advantage of his own personal expertise.

A similar point was made by Neill LJ, albeit in the different context of the inter-relationship between garden leave and restrictive covenants. If an employer has already secured a period of protection by garden leave, should this be set-off against the period of a restrictive covenant? The Court of Appeal concluded that it need not (although such set-off provisions are included in many standard executive contracts today). However, Neill LJ added a caveat as follows:

Terms which operate in restraint of trade raise questions of public policy. The opportunity for an individual to maintain and exercise his skills is a matter of general concern. I would therefore leave open the possibility that in an exceptional case where a long period of garden leave had already elapsed, perhaps substantially in excess of a year, without any curtailment by the court, the court would decline to grant any further protection based on a restrictive covenant.

Running through these statements, especially Dillon LJ's in Provident v Hayward, is the intriguing notion that a term properly incorporated in an employment contract providing for a period of garden leave, might not be enforced by the courts because it is considered excessive or abusive. But if that is the case – and there appear to be strong moral arguments in support of such a view – what are the legal tools which enable the court to reach such a conclusion? What is the proper legal analysis that permits the court to refuse to enforce a term of an agreement entered into by two contracting parties? At one level, it is possible to say that the court, in the exercise of its discretion, will decline to grant an injunction to enforce an excessive period of garden leave. It could be argued that analytically it is unnecessary to go any further. But that seems to me to be an inadequate explanation of the legal position. It also fails to address another aspect of the same problem. What if the employer sues for damages for breach of an excessively long garden leave provision. Is the court to assess damages? Or is it to refuse to do so on the basis that the clause is unenforceable? And if the latter, what is the legal basis for its unenforceability?

It is this conundrum – how does the court justify intervention to prevent abuse of garden leave provisions - that brings me full circle to my starting-point. That is, the importance of the doctrine of restraint of trade in employment, and of the two principles that underpin it, as enunciated by Trebilcock, namely the fairness principle and the economic development principle.

Is it possible to develop these various strands into a coherent legal framework that would allow the courts to intervene and strike down those clauses in employment contracts that are unduly onerous from the point of view of one party (which is overwhelmingly likely to be the employee)? Is the common law able to recognise a principle of fairness in employment contracts that will allow the courts to intervene and regulate the employment relationship where necessary? Perhaps, as it did during the mercantilist era.

What is clear is that, at present, the courts pray in aid a number of different analytic tools to achieve the ends of justice that are perceived to be warranted in any particular case. Consider these examples.
Until 1974, it was unclear whether the doctrine of restraint of trade applied to a contract of service or for services during its continuance as opposed to its undoubted application to post-termination restraints. That question was resolved by the House of Lords in A Schroeder Music Publishing Co Ltd v Macaulay, a case of the greatest significance for our present inquiry. The case concerned a songwriter who, when aged 21 and unknown, entered into an agreement with music publishers in their standard form whereby the publishers engaged his exclusive services during the term of the agreement. The trial judge, the Court of Appeal and the House of Lords all agreed that a declaration should be granted that the agreement was contrary to public policy and void. But it is the route by which they arrived at this destination that is so important.
Lord Reid rejected the argument against the court's intervention which was based on freedom of contract. He observed that the passages in Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd relied upon in support of the argument against the court's intervention referred to contracts "made freely by parties bargaining on equal terms" or "moulded under the pressures of negotiation, competition and public opinion." He found no such evidence in the present case. Thus, Lord Reid relied, at least in part, upon the concept of inequality of bargaining power to intervene and strike down the agreement. But, Lord Reid was concerned also with substantive as well as procedural unfairness. He formulated the relevant test in this way:

If contractual restrictions appear to be unnecessary or to be reasonably capable of enforcement in an oppressive manner, then they must be justified before they can be enforced.

It is, in my view, salutary to acknowledge that in refusing to enforce provisions of a contract whereby one party agrees for the benefit of the other party to exploit or refrain from exploiting his own earning power, the public policy which the court is implementing is not some 19 ^th-century economic theory about the benefit to the general public of freedom of trade, but the protection of those whose bargaining power is weak against being forced by those whose bargaining power is stronger to enter into bargains that are unconscionable.

Lord Diplock went on to hold that the question to be answered as respects a contract in restraint of trade of the kind with which the case before him was concerned is "Was the bargain fair?" The test of fairness was, he had no doubt, whether the restrictions are both reasonably necessary for the protection of the legitimate interests of the promisee and commensurate with the benefits secured to the promisor under the contract. For the purpose of this test all the provisions of the contract must be taken into consideration. Thus, the two limbs of the Nordenfelt test – reasonable in the interests of the parties, and of the public – are brought together under one generic test, namely: was the bargain fair? It seems to me that there is no good reason why this test of "fairness of the bargain" should not apply generally, whether to the whole agreement, or to any particular term of it.

Subsequently, Scott J followed the approach in Schroeder's case in deciding that an agreement between a boxer and his manager was unenforceable since it contained restrictions on the boxer which were unreasonable and unduly restrictive: Watson v Prager (36).

The principle of fairness then as a guiding principle for judicial intervention in employment contracts, particularly in relation to restrictions sought to be imposed on the employee's right to work, could be said to derive support from a number of sources: the early application of the doctrine of restraint of trade in the mercantilist era and, according to Lord Diplock, the in the 19th century cases also, to protect an employee's right to work; the willingness of the courts to intervene to prevent an abuse of garden leave provisions for an excessive period; the approach of the courts to refuse to enforce exclusive service agreements where they are unfair or unreasonable as in Schroeder and Watson v Prager; and, finally, the tendency of the courts to adapt the law to changing social conditions and find that an employee enjoys an implied contractual right to work (albeit that this is presented as a question of construction of the contract in the light of all the relevant circumstances).

I pause to note that the courts have invoked doctrines of reasonableness and fair dealing in other contexts to justify judicial intervention to meet the justice of the case. Thus, in Briggs v Oates (37), Scott J declared unreasonable a covenant purporting to apply following an employer's repudiation of the employment contract, although the better analysis may well be that it is a matter of construction rather than of the doctrine of restraint of trade (38). Elsewhere, in the commercial context, Bingham LJ was influenced by the civil law concept of fair dealing in contracts in deciding that an unduly onerous clause not brought to the attention of the other contracting party was not properly incorporated into the contract or was not enforceable: Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd. (39)

This striving for a unified doctrine of fairness received something of a setback in the George Michael case, although that, of course, was not concerned with an employment contract (40). In that case, George Michael sought to be released from the agreement with his music company on various grounds, principal among these being restraint of trade. In dealing with the law on this topic, Parker J at the outset stated that a distinction had to be drawn between the common law jurisdiction to declare a contract unenforceable as a restraint of trade (which was invoked in that case) and the equitable jurisdiction to grant relief in certain circumstances against unfair and unconscionable bargains.
The Judge stated that both jurisdictions are based on public policy, there being no other justification for the court intervening where contractual obligations have been assumed voluntarily. However, although both jurisdictions may be rooted in a single broad public policy, the position had now been reached on the authorities (as Parker J read them) where differing public policy considerations – or differing aspects of a single broad public policy – apply to each jurisdiction.

This apparent distinction notwithstanding, Parker J recognised that in certain cases the two jurisdictions may overlap. This will occur, for example, in the case of an unconscionable bargain where the unfair advantage obtained by one party takes the form of a restraint of trade imposed on the other. In such a case, he ventured, once it is determined that the contract is one which must be justified as being "fair, just and reasonable", the test of fairness to be applied to the restraint of trade is the Nordenfelt test. The example cited by Parker J was Schroeder, although whether he correctly summarised the approach adopted in that case may be open to question.

At the end of the day, Parker J concluded that similarities notwithstanding, the two jurisdictions have over time developed in different ways and are not, as of today, to be regarded as being a single homogeneous jurisdiction. But, in so far as concerns employment contracts imposing restrictions on employees' freedom of trade during as well as after their employment, Parker J acknowledges that these two jurisdictions overlap.

This approach is consistent with the theme of my talk which is to suggest that the time has now come in relation to employment contracts for a fusion of these two jurisdictions to found a public policy based on fairness which will allow the court to decline to enforce particular restrictions on employees where, in all the circumstances of the case, the court concludes that it would be unfair to do so.

1. First, whether an employee enjoys an implied right to work is, strictly speaking, a matter of construction of the particular contract in the light of all the circumstances of the case. However, the courts have recently shown themselves more willing than previously to recognise such a right in view of changed social conditions, and to intervene to protect the employee's right to work from abuse.
   
2. Secondly, where the right to work exists, an employer will be unable to place an employee on garden leave unless the contract of employment contains an express garden leave clause. Even where such a clause is included, the employer will need to justify the grant of a garden leave injunction on the same basis as would justify the enforcement by injunction of a post-termination restrictive covenant.
   
3. Thirdly, the courts will intervene to prevent an abuse of garden leave provisions whereby an employer seeks to deny an employee the opportunity to work for an excessive period. Such an approach is based on public policy which is reflected in the doctrine of restraint of trade. This doctrine has led to a more interventionist role for the courts in the past, particularly during the mercantilist era, to protect the right to work. The doctrine has more recently enjoyed a resurgence in the modern era following their decline in the laissez-faire era, when freedom of contract was in the ascendant. Most importantly, the principles underlying this doctrine are the principle of fairness and the principle of economic development, and the growing influence of the fairness principle, in particular, can be seen in recent cases.
   
4. Finally, it is arguable that the time has now come, in relation to employment contracts, for a reformulation of the doctrine of restraint of trade, and for its fusion with equitable principles of unconscionability. This could lead to a general doctrine of fairness which would permit the courts to decline to enforce provisions of an employment contract which impose restrictions on an employee where to do so would be unfair. This doctrine would provide a coherent legal framework for the court's role in relation to restrictions during the continuance of the employment (such as garden leave) as well as after the termination of employment (as with restrictive covenants). It would be a natural development of this recent trend on the part of the courts to intervene to protect the individual against an unfair bargain, and an employee against unfair interference with his right to work. This trend is evident in cases from Schroeder v Macaulay through to William Hill v Tucker. Whether the courts will show any inclination to move in this direction, only time will tell.

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Notes:

1-[1998] IRLR 313.
2-[1894] AC 535 at 553-4.
3- [1997] ICR 938.
4 - General Billposting Co Ltd v Atkinson [1909] AC 118.
5- [1997] ICR 938 at 958B.
6- [1998] IRLR 313, para 18.
7-3rd ed., p149.
8-(1711) 24 ER 347.
9- (1875) LR 19 Eq 462 at 465.
10- p565.
11-The leading practitioner texts are Employment Covenants and Confidential Information by Brearley and Bloch (1993), and Restraint of Trade and Business Secrets by Mehigan and Griffiths (1996) 3rd ed.
12- Of older vintage is The Restraint of Trade Doctrine by Heydon (1971). See also the interesting discussion in The Contract of Employment by Freedland (1976) at 155-157.
13- (1855) 119 ER 781 at 788.
14-[1927] 2 AC 394 at 402.
15-Friedman (1942) 6 MLR 1 at 17.
16- (1982) 40 OR (2d) 219 at 233.
17-Warner Brothers Pictures Inc v Nelson [1937] 1 KB 209.
18- eg, Page One Records Ltd v Britton [1968] 1 WLR 157.
19- Evening Standard Co Ltd v Henderson [1987] ICR 588.
20-[1989] ICR 160.
21- [1994] IRLR 119.
22- [1995] IRLR 206.
23- Paras 31-41.
24-[1974] IRLR 15 at para 32.
25- Para 40.
26- Para 45.
27- Para 24.
28-Para 25.
29-17 Jan 1996; LTA96/5039/E.
30- [1989] ICR 160 at 165E-F.
31-Credit Suisse Asset Management Ltd v Armstrong [1996] ICR 882 at 894C-D. See, also, Credit Suisse First Boston (Europe) Ltd v Padiachy [1998] IRLR 504, paras 27-28.
32-[1974] 1 WLR 1308.
33- [1968] AC 269 per Lord Pearce at 323 and Lord Wilberforce at 332-3.
34- [1974] 1 WLR 1308 at 1314H.
35-[1974] 1 WLR 1308 at 1315F (emphasis added).
36- [1974] 1 WLR 1308 at 1315G-H.
37- [1989] 1 QB 433.
38-[1990] ICR 473.
39- cf. Rock Refrigeration Ltd v Jones [1997] ICR 938.
40- [1989] 1 QB 433.
41- Panayiotou v Sony Music Entertainment [1994] EMLR.

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