Garden leave occurs after an employee is instructed not to attend the workplace or carry out their work duties following their resignation or their employment having been terminated. This can be for the whole or just part of their notice period. The employee however still receives the benefits and pay under the terms of their employment as if they were carrying out their role.
At a first glance, it may not make sense to pay someone not to work for you. However, it is a strategy used by employers to protect their business interests when an employee is exiting the business. More commonly, it is used where there are senior executives or directors involved as they have greater access to data, information and clients/ suppliers.
Under the terms of ‘garden leave’ ordinarily, the employee will not be permitted to communicate with colleagues or clients / supplier and is also therefore commonly used where an employee whose continued access to the workplace, or contact with colleagues and clients, gives rise to a risk of poaching or misuse of information. A further example may be where there are concerns with the employees conduct or capability; with the employee still being ‘employed’ but on garden leave, the employer may be able to keep them away from a competitor for as long as possible.
Some other benefits of placing an employee on garden leave are as follows;
- ensuring the exiting employee is available if the employer has any queries or requires any assistance with a handover to any successor
- enabling the successor to settle into the role and establish client relationships without the exiting employee negatively impacting new relationships
- preventing an employee from doing anything that that would potentially damage the employer’s business interests until the notice period has come to an end
- ensuring the employee remains bound by all contractual clauses for at least the period of garden leave, including their duty of fidelity and confidentiality
- the use of gardening leave can be particularly useful where the employer is concerned that any post-termination restrictive covenants may be difficult to enforce against the employee. This is because gardening leave can be more easily used to keep the employee away from competitors, from setting up in competition or misusing company information whilst still under contract.
- may help to deter a competitor from poaching employees in the first place
In most cases, and employee can only be placed on garden leave where there is an express garden leave clause in the employee’s contract allowing their duties to be varied, or withdrawn altogether, during the notice period. The term ‘garden leave’ will normally be used where there is such a contractual term so it should be easy to spot whether there is such a clause in existence or not.
The most obvious drawback is the costs involved in keeping the exiting employee under contract as they retain their right to pay and all benefits. The employee will also continue to accrue their annual leave during any period of garden leave.
Placing an employee on garden leave where there is no express contractual right to do so exposes the employer to legal risk. E.g. if the employee’s remuneration is dependent on them actively working and they receive commission or bonuses, or where working is necessary to maintain a professional level of skill, any failure to provide the employee with work could result in a breach of contract claim.
When should gardening leave be used?
Where there is any possibility that allowing the employee to work out their notice would expose the business to any risk and there is an express gardening leave clause within the employee’s contract.
One thing that employers should always be mindful of is the length of any gardening leave. Any period of garden leave should not be longer than is necessary to protect the employer’s legitimate business interests. Ordinarily, the duration of gardening leave mirrors the employee’s contractual notice period. Although for many senior employees notice periods can be as much as 12 months, it is likely that a court will not allow anything more than 6 months garden leave.
Employers should always think very carefully about deciding to place an existing employee on gardening leave, considering the pros and cons of keeping the employee away from the business whilst retaining them under contract.
We would always recommend seeking expert HR advice where an employer is looking to introduce gardening leave provisions for the first time. Employers may also want to review existing clauses to ensure that they are specific and are appropriate and necessary to protect the employer’s legitimate business interests.
Employers should:
Consider including a gardening leave clause within the employment contracts for senior of key team member. Ensure however that this is carefully drafted and that it is suited to the role, seniority and notice period and is necessary only to protect the legitimate interests of the business to maximise the likelihood of enforceability in the event that there is any dispute.
An employer should also consider making a contractual provision to shorten the period of any post-termination restrictions on the employee’s activities by the period of time spent on gardening leave. In these circumstances, the courts will be more likely to enforce any restrictive covenant.
Should you need any advice regarding gardening leave or introducing / amending garden leave clauses please do not hesitate to contact a member of the team 0333 2005153
Do you know where the term ‘gardening leave’ comes from? It is understood to come from an episode of the sitcom ‘Yes, Prime Minister‘ in 1986.
