What is it and when should garden leave be applied?
Garden Leave, is a measure that is often used by employers. It is used to keep employees, who are leaving the organisation, out of the workplace during their notice period. It can be applied to any employee, regardless of their status. Although it is more commonly applied in the case of senior employees who may have technical knowledge, strategic market and pricing information or valuable customer contacts. It should not however be confused with situations of suspension from work with pay. This is used to keep the employee out of the work place whilst disciplinary proceedings are investigated and undertaken.
Garden leave and restrictive covenants
Garden leave is often implemented alongside a range of post-termination restrictive covenants. These contractual clauses may prevent the employee from, poaching or soliciting the employer’s clients, fellow employees and/or business contacts. It has become common practice for employers to offset any time the employee spends on this type of leave against the length of time they would be expected to comply with their restrictive covenants after their employment ends. Although court decisions have confirmed that that there is no legal principle of ‘automatic set off’ of garden leave against periods of restriction, the existence of a garden leave clause will always be a factor that is to be taken into account in determining the validity and length of any restrictive covenant period.
Contract of employment
It should be remembered that employers can only place employees on this type of leave where there is an express term in the contract of employment that allows them to do so. Typically, such contractual clauses will state that the employer will be able to place an employee on garden leave for the whole of their notice period. However, where an employee has an exceptionally long notice period,( such as in excess of six months), an employer may be unable to enforce garden leave for the full period. If asked to intervene, a court is only likely to enforce garden leave for a period that is as long as it is necessary to protect the legitimate interests of the employer. During the garden leave period, the employer must continue to pay the employee the appropriate level of salary and provide any other usual contractual benefits. An additional factor for an employer to consider is therefore whether there is any bonus that will continue to accrue during the period of garden leave. Such decisions to implement garden leave can therefore be extremely costly for employers, given the high potential outlay and the lack of work done in return by the employee.
In summary
In summary therefore, the key considerations on the subject of garden leave include the following:
- Serves to prevent the employee from attending their place of work during the notice period and will either require the employee to work from home or to do no work at all during that period.
- Can only be implemented by an employer where there is an express contractual term allowing the employer to do so.
- It is commonly used where an employee is entering a notice period prior to the effective date of termination of their employment, whether the termination has arisen through a resignation, a dismissal or any other circumstances.
- The practice is often used to prevent employees from taking up-to-date and sensitive information with them when they leave their employment, particularly when they are leaving to join a competitor.
- The employee will remain employed until the end of their period of notice which will usually coincide with the end of the period of garden leave.
- Employee should receive their normal pay and benefits throughout the period of garden leave.
So, if you are an employer wishing to enforce either garden leave or restrictive covenants, contact Quest advisors for specialist advice on all aspects of your particular situation. See also the Exit Management HR Guide
