In Imman-Sadeque v BlueBay Asset Management (Services) Ltd, the High Court held that an employee who assisted a competitor whilst on garden leave breached his employment contract and compromise agreement. In so doing, he had also failed to comply with various conditions in the compromise agreement which would have made him a 'good leaver' for the purposes of his entitlement to unvested shares worth around £1.7 million.
Mr Imman-Sadeque was a highly paid, senior investment manager for BlueBay Asset Management. He wished to leave, but if he resigned, he would be a 'bad leaver' and would lose the right to receive his unvested shares. The company therefore agreed that he would be deemed to be a 'good leaver' provided that he complied with various express and implied duties in his compromise agreement and contract of employment. During Mr Immam-Sadeque's garden leave period, BlueBay alleged that he breached these provisions by assisting in setting up a competitive business, poaching an employee, and giving away highly confidential information.
BlueBay therefore withdrew the benefit of the shares. Mr Imman-Sadeque denied the breaches and argued that the forfeiture provision in the compromise agreement was a penalty clause and therefore unenforceable.
The High Court dismissed Mr Imam-Sadeque's claim, holding that he was in breach of implied terms, including the duties of fidelity and mutual trust and confidence, as well as express terms, including the duty not to compete and to act in the best interests of the company. This meant that he had forfeited the benefit of being deemed a good leaver under the compromise agreement. The Court also held that this type of conditional benefit is not a penalty, and is in any event commercially justifiable.
The employer in this case was protected by very comprehensive express provisions and restrictions in the employee's employment contract and compromise agreement, including an express provision that the duty of fidelity would continue to apply during garden leave. This emphasises the importance of tailoring restrictive covenants and provisions relating to the duty of fidelity to an individual's precise role and seniority. It also illustrates how properly drafted agreements can allow employers not to provide benefits to employees who are in breach of their contractual obligations.
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