Garden Leave

What is garden leave?

“Garden leave” refers to the ability of an employer to restrict an employee during their notice period, e.g. by requiring them not to come into work and/or not to have contact with clients etc. During garden leave, an employee remains bound by their contract of employment and obligations owed to the employer and should continue to receive their usual pay and benefits.

Garden leave allows employers to keep an employee out of the marketplace long enough for any information they have to go out of date, or for the employee’s successor to establish themself with customers and suppliers so as to protect the goodwill of the company. Such clauses are typically used in conjunction with restrictive covenants which prevent an employee from soliciting customers or enticing away other employees from the business.

Can you put an employee on garden leave if the employment contract is silent?

Placing an employee on garden leave generally requires there to be an express term in the contract of employment giving the employer the option of doing so. If there is no express contractual term, the employer and employee may be able to agree and proceed on the basis that it is a suitable course of action. However, if there is an express or implied right to do work, and the employer denies the employee the ability to carry out any duties, this may amount to a repudiatory breach of contract. This may be the case notwithstanding that the employee continues to receive their pay and contractual benefits. (In some industries, not being able to perform work may adversely affect an employee’s ability to keep up their practice hours or they may be deprived of exercising their skills, so whether a “right to work” term applies is likely to depend on the context.)

What if the employee refuses garden leave and instead seeks to resign without notice?

An employee may not wish to be placed on garden leave and instead try to resign immediately without notice, perhaps because they have a new job and want to start right away. In such cases, the employer is entitled to hold the employee to their obligation to give due notice and, provided there is a contractual term entitling them to do so, insist that the employee serves their notice on garden leave.

In an extreme case, where the employee does not cooperate and/or there is evidence that they may be in breach of their employment obligations not to compete, the employer may consider seeking a legal remedy, such as an injunction, to prevent them joining a competitor in breach of their contract. Since the courts view garden leave as a species of restraint of trade, the employer would need to show that there are legitimate interests meriting protection, i.e. an employee who is joining a competitor is more likely to be subject to restraint compared with an employee who is not competing with the employer. Furthermore, the court will usually require the employer to give an undertaking to continue paying the employee’s salary and to provide any other contractual benefits for the duration of the notice period.

Effect of garden leave

The employment contract continues during any period of garden leave and so the employer must continue to perform all its obligations, including paying salary and benefits and allowing the employee to take annual leave. Note that holiday entitlement continues to accrue during garden leave so if it is intended that an employee takes part or all of their accrued holiday within this period, this needs to be made clear in addition to agreeing which days are “leave” and when the employee is otherwise to be “available” for work albeit on garden leave. The employee must also continue to comply with the terms of their contract, apart from the requirement to carry out work if they are requested not to attend the office and are not assigned any alternative duties. Importantly, they will remain bound by their duty of fidelity, which means that, during garden leave, they must behave honestly and in good faith and not, for example, compete with the employer.

How long is garden leave?

The duration of garden leave will usually correspond to the employee’s contractual notice period[1], although for many senior employees notice periods can be as long as 12 months. Whilst each case will depend on its own facts, it would be unusual for garden leave to exceed 6 months and anything longer would be unlikely to be enforced by the courts. Additionally, there is usually a set off between post-termination restrictions and garden leave leading to the duration of the post-termination restrictions being reduced by any period that the employee has spent on garden leave.

What to include in a garden leave clause

As noted above, the purpose of garden leave is to protect the employer’s business by: (i) keeping the employee away from the office so as to limit their contact with other employees and customers and curtailing their access to confidential information; and (ii) preventing them from working for another employer or setting up in competition on their own account until their notice period has expired.

A well drafted garden leave clause should:

• specify the duration of the garden leave and the rules that apply during this period, e.g. prohibiting contact with colleagues, customers and suppliers;
• permit the employer to exclude the employee from the company’s premises;
• obligate the employee to return all company property that they have (save where the use of an item is a “benefit” of employment, e.g. company car, which the employee may be entitled to use during the notice period); and
• require the employee to remain available to answer queries or provide a handover (subject to agreed time off for holiday etc).

Typically, a well-drafted garden leave clause will bolster related restrictions within the contract (e.g. regarding use of confidential information and the duty of good faith owed etc). It may also acknowledge the set off between garden leave and restrictive covenants, as noted above.

You can ask us: to draft or review a garden leave clause and whether the exercise of such provision is advisable in any particular circumstances, how to enforce a garden leave clause or non-compete and about the ways you can protect your business’s confidential information, customer connections and workforce stability both during the employment relationship and after it ends.

Reference: 

[1] However, it is possible to agree that a notice period will be partly worked and partly spent on garden leave.