The phrase ‘garden leave’ crops up often when you are talking about employees who are leaving a business, but it is not always clear what is meant by the term. Here is an explanation of the concept:
- Garden leave describes the situation when an employee who is leaving employment spends some or all of their notice period away from work (and, crucially, away from confidential information and clients). The idea is that they are placed in their ‘garden’.
- Garden leave can be very useful to employers in helping them to preserve trade secrets, introduce key clients and contacts to any replacement and provide a period when the employee is not ‘visible’ to clients.
- You should not place an employee on garden leave without their agreement. This is usually done through an express term in the employee’s contract of employment.
- If there is no express term, and the employee does not voluntarily agree to be placed on garden leave, the employer is at risk that the employee could argue that they have a contractual right to work and that forcing them to go on garden leave is a breach of contract.
- The terms of garden leave should be set out in the contract of employment. It is usual for any period of garden leave to be on full pay. Whether any other contractual benefits continue will depend on the wording of the garden leave clause. If it is silent then they are likely to remain payable in full.
- Garden leave is linked to the contractual notice period so it generally lasts for the duration of the notice period. It cannot continue any longer without agreement.
- Garden leave has a close connection with post-termination restrictive covenants. Both involve keeping an employee away from competitive activity, clients and employees for a period of time. However, it is much easier to retain control of a departing employee on garden leave as they remain employed.
- It is usual for any restrictive covenants in the employment contract to be reduced by one day for each day that the employee is on garden leave. This is because the employee is not actively in the business and interacting with employees and clients during this period. The Courts are not likely to see a doubling in the length of practical restriction (i.e. garden leave period plus full restricted period) as being reasonable or enforceable.
Garden leave has an important role to play in controlling the exit of key employees and making sure there is a smooth transition to any replacement. To take advantage of this, employers are urged to check their contracts of employment (especially for senior and sales staff) to make sure that they have an express contractual term giving them the option to place employees on garden leave.
Find out how we can help. Our partner, Jon Dunkley, heads the Wollens specialist Employment Department. Contact him today for an informal chat, without obligation on 01271 342268 or via email at [email protected].