Garden leave is used by employers as a protective measure to ensure that key employees exiting a business have a minimal impact on its reputation and ongoing success. That said, the use of garden leave does not come without cost and certain risks for the employer.
In the following article, we examine the pros and cons for employers considering when to use garden leave, including advice on when garden leave can be used when it’s best avoided.
What is garden leave?
Garden leave, or gardening leave as it’s also referred to, describes the workplace practice where an employee leaving a job – having resigned, been made redundant or dismissed – is instructed by their employer not to attend the workplace or perform any duties, either at home or otherwise, during the whole or part of their notice period.
Gardening leave is generally used by employers to keep employees out of the competitive market for a period of time. It is a measure generally used for senior employees who have access to sensitive and strategic information such as pricing data, high-level technical knowledge, or important customer contacts.
Essentially, employers want to make sure employees are not able to access or use that information in the market or with a competitor.
Often gardening leave is used in conjunction with restrictive covenants that put agreements in place that prevent the employee from taking customers with them or approaching contacts for a set period of time.
Garden leave may be instigated by the employee, with the employer’s agreement. This would usually form part of a negotiated exit, and documented in writing.
Pros of gardening leave
There are various commercial and legal benefits that come with gardening leave, not least because the employer retains control over the employee — who remains bound by the express and implied terms under their contract of employment — but without any obligation on the part of the employer to provide them with work or with access to the workplace, including access to company information, colleagues or clients.
These benefits can include:
- ensuring the exiting employee is available if the employer has any queries or needs help with a handover to the employee’s successor
- enabling the employee’s successor to establish themselves, especially with clients, so as to protect goodwill without the exiting employee negatively impacting new relationships
- preventing the exiting employee from poaching colleagues or clients
- keeping the exiting employee away from client contact information, or other confidential or sensitive company data, and preventing them from misusing that data
- keeping an exiting employee out of the marketplace long enough for any information they already have, that may be useful to a competitor, to go out of date
- preventing an employee from working for another employer or acting in a self-employed capacity until the period of notice has come to an end
- preventing an employee from doing anything that is contrary to the employer’s business interests until the period of notice has come to an end
- ensuring the employee remains bound by all contractual clauses for the period of gardening leave, including their duty of fidelity and confidentiality
- enabling an employer to seek damages and injunctive relief to prevent an employee from causing damage to the business and benefiting from any breach of their ongoing duties.
The use of gardening leave can be especially useful where the employer is concerned that any post-termination restrictive covenants may be difficult to enforce against the employee. Indeed, the courts have tended to treat the former with greater flexibility than the latter, where 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.
The existence of an express gardening leave clause within the contracts of senior employees can also deter competitors from poaching key members of staff in the first place.
Cons of gardening leave
Despite the significant benefits of gardening leave, this can also give rise to various drawbacks for an employer, not least the costs involved in keeping the exiting employee under contract. Gardening leave is essentially the same as suspending an employee on full pay.
The continuation of the contract for the period of gardening leave means the employee will not only be entitled to full pay, but all other contractual benefits. This can prove to be expensive for the employer and the business, especially where a replacement has been recruited before the contractual obligations to the exiting employee have come to an end.
Employers should also bear in mind the potential legal risks of using garden leave in the absence of any express contractual provision entitling them to do so. Where, for example, the employee’s remuneration is dependent on their right to work, such as 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.
In these circumstances, the employee could feel forced to resign and claim constructive dismissal on account of the employer’s breach. The protection of garden leave would be lost, and the employer potentially faces costly and time-consuming legal proceedings. The employer may also lose the right to rely on other parts of the employee’s contract of employment, such as post-termination restrictive covenants and any confidentiality clause.
What happens during garden leave?
During gardening leave, the individual will be contractually retained by the employer as an employee, but they will be kept away from the business. This means that the employee will not be required to complete any work, attend work, or to communicate with colleagues and clients, although the employer can request the employee to supply them with information and assistance, support their work or even return to the workplace during garden leave.
As such, employees should inform their employer if they intend to take a holiday or leave the country while on garden leave.
The contract of employment continues to exist during any period of gardening leave, and until its expiry, the employer must continue to:
- pay the exiting employee their normal salary
- provide the employee with the same contractual benefits.
Similarly, employees on garden leave are under obligation to observe all the terms of their contract. This includes acting in good faith and maintaining confidentiality. They will also not generally be permitted to take up work with another company or start to undertake work for themself during the period of garden leave.
How long is garden leave?
The length of garden leave should be determined by the terms of the employment contract. In most cases, this would usually equate to the duration of the employee’s applicable notice period. This means more senior and experienced employees would typically have longer periods of garden leave. In practice, it would be unusual for garden leave to last longer than 6 months.
Garden leave of an excessive or unexpected length can cause problems for the employee when it comes to future career options. If a prospective new employer is impatient or has pressing needs, they may be unwilling to wait for a long period of garden leave to end and it may hamper the employee being out of the market for an extended period of time.
Who can be put on garden leave?
Garden leave is a strategy used by employers to protect their business interests when an employee is leaving, typically in respect of senior executives or company directors who have greater access to confidential or sensitive information and a wide pool of clients. Gardening leave is also commonly used for any employee whose continued access to the workplace, or contact with colleagues and clients, gives rise to a risk of poaching or misuse of information.
Employers can only place employees on gardening leave if there is a term in the employees’ contract that permits them to do so. This term will permit the employer to withdraw their duties and exclude the employee from the working premises.
Usually the employee will be placed on garden leave for their entire notice period, however, if the employee has a notice period that is exceptional in length the employer may be unable to force the garden leave to last this long. A court ruling would be likely to find that garden leave can only be enforced for a length of time legitimate to protect the interests of the employer.
When should gardening leave be used?
Gardening leave can be used in any circumstances in which the employee’s contract of employment is being brought to an end and they are required to fulfill their notice period. This includes where an employee is dismissed with notice, made redundant or has resigned. The question of whether gardening leave ‘should’ be used will depend on the facts of the case.
The purpose of gardening leave is to enable the employer to protect their business interests by keeping the employee away from the workplace, colleagues and clients for some or all of their notice period. If there’s any likelihood that allowing the employee to work out their notice would expose the business to any risk, and there’s an express gardening leave clause within the employee’s contract, this can and should be used by the employer.
However, employers should always be mindful of the length of any gardening leave, not only because of the cost consequences of retaining a senior employee under contract, but also because this period must not be longer than is necessary to protect the employer’s legitimate business interests. When determining the reasonableness of any period of gardening leave, the employee’s notice period will be a significant but not necessarily decisive factor.
In most cases, the duration of gardening leave tends to reflect the employee’s contractual notice period, although for many senior employees notice periods can be as much as 12 months. Much will depend on the facts, although the longer the period the less likely it is that a court would enforce this in full, typically allowing no more than 6 months.
When should gardening leave be avoided?
Given the costs associated with gardening leave, employers should think very carefully about retaining an exiting employee under contract where this would stretch the financial resources of the business. If there’s contractual provision for pay in lieu of notice — together with post-termination restrictive covenants, although arguably more difficult to enforce — these can help to protect the employer’s business interests as a cheaper alternative to gardening leave.
Any employer who wishes to place an employee on a period of gardening leave must also first ensure that there’s an express clause in the contract of employment entitling them to do so. This removes much of the uncertainty as to whether the employer has the contractual right to impose gardening leave, although the existence of a gardening leave clause, doesn’t guarantee that things will always run smoothly.
For some employees, rather than treating gardening leave as an opportunity to take time-out to pursue hobbies or relax at the employer’s expense, this can be perceived as an unfair restriction of their right to work. The employer should therefore be prepared for the possibility of needing to take enforcement action against an employee who is refusing to comply with the terms of any gardening leave clause.
Still, the likelihood of any breach should not necessarily dissuade an employer from using gardening leave, although the period of restraint should be kept to a minimum, and certainly, no more than is necessary to protect the employer’s business interests.
What to include in a garden leave clause
Critical to the impact of putting someone on garden leave will be the contractual clause that sets the terms of the leave. Any ambiguity or confusion can result in complaints and potentially legal claims against the employer.
A well-drafted garden leave clause should specify the duration of the period of garden leave and the rules that apply during this period, such as prohibiting contact with colleagues, clients, customers and suppliers; obligating the employee to return all company property in their possession; and requiring them to remain available to their employer to answer queries or help with a handover.
Typically, a well-drafted garden leave clause will also bolster any related restrictive covenants within the contract.
Restrictive covenants may also apply when putting someone on garden leave. Restrictive covenants are terms within employment contracts that prohibit the employee from undertaking certain activities post-contract termination. For example, restrictive convenants may specify that the employee cannot start work for another competitor following termination of their contract for a set period of time – usually a number of months.
There may also be a restrictive covenant that prevents the employee from making contact with suppliers, customers and even employees. These covenants legally should only be applied if absolutely necessary and serve to protect the business interests of the employer. Customer data and connections, confidential information and the stability of the workforce would generally be deemed legitimate business interests.
Employers commonly offset the length of gardening leave with the time they expect employees to abide by covenants. If an employee abides by a garden leave period of 3 months, for example, and also has a 6-month restrictive covenant that stops them from approaching former clients, the employer may choose to compromise and reduce the client approach covenant to just 3 months.
There is no legal principle surrounding this, but courts could take into account the existence of gardening leave in determining if a covenant is valid.
Can you put someone on garden leave without a clause in the contract?
Without an express contractual term on garden leave, the employer and employee may be able to agree and proceed on the basis that it is a suitable course of action.
However, if an employer puts someone on gardening leave without express provision within the employee’s contract, the employee may be able to bring a claim for breach of contract on the grounds of being excluded from work. If the employee pursues a breach of contract claim, when assessing the case, a court will generally base its judgment on whether the employee has a contractual right to work.
In the past it was generally held that while there is a right to be paid, there was no implied contract to work. If this stands, an employer is not obliged to provide an employee with work (only to pay them) therefore, they could place an employee on garden leave without breaching the employment contract – even if no explicit clause was included.
However, in recent cases, courts have appeared increasingly to rule that employees do in fact have a right to work if no garden leave clause exists in their contract. For example, the Court of Appeal found in William Hill v Tucker that the employee had an implied right to work. This was based on the employee needing regular, frequent, and continued experience of their market to enhance and preserve their skills for future work.
Questions around employee bonuses also need to be taken into account. If an employee is placed on garden leave and does not continue to accrue a bonus during that time, then the enforced leave can be viewed as financially detrimental to the employee. This may render the garden leave clause, or enforced garden leave, unenforceable.
If the employee is refusing to go on garden leave
What happens if an employee wishes to leave their job with immediate effect, while the employer wants to enforce the garden leave clause?
This is a likely scenario where an employee has secured a new job and they wish to keep their contacts and knowledge fresh, or perhaps their new employer is pressing for them to start as soon as possible.
In such cases, the employer should refuse to accept the employee’s resignation without notice, so that the employment contract is not terminated. The employee should instead be held to their obligation to give notice by being placed on garden leave for the duration of the relevant notice period.
In the event the employee refuses to follow the terms of garden leave, the employer may be able to apply to the courts for an interim injunction on the basis that immediate termination of the contract would be damaging to their business. For restraint of trade to apply, the employer would need to show legitimate business interests that require protection, specifically in relation to either confidential information, customer connection or stability of the work force.
In addition the employer must also show that it has suffered or is likely to suffer detriment should the employee not be subject to restraint. For example, an employee who will be joining a competitor firm is more likely to be subject to restraint compared with an employee who is leaving their industry altogether.
This detriment will be balanced against the impact of garden leave injunction on the employee, specifically, whether it wil cause the employee disproportionate harm.
Where relief is to be granted, any period of restraint is at the court’s discretion, and will not simply by an application of the contractual provisions. The period will be set by the courts on the basis of what is determined as the minimum – not maximum – required to meet the employer’s legitimate purposes in protecting its business interests. In practice, this often means the courts reduce the period of garden leave stated in the contract.
How does PILON differ from gardening leave?
Payment in lieu of notice is not to be confused with garden leave which is a separate concept. Where PILON applies, the employee’s employment is terminated immediately, and the employee is paid the amount they would have earned had they worked their notice period. Because the employment has terminated, the relationship between the employer and employee has ended, the employment contract terms are no longer binding and the employee is free, for example, to find work elsewhere.
If an employee is placed on garden leave, their employment contract will remain effective for the duration of the period of leave until the date the contract is terminated. This means they are still employed by their employer for the garden leave period but are not required to go into their place of work. They will continue to be paid and accrue their rights and benefits in the usual way during the garden leave period and technically they could be required by their employer to undertake work.
Can the employee start a new job while on gardening leave?
While on gardening leave, the employment contract remains valid and both parties remain bound by its terms. Although the employee will not be required to work, they will continue to be paid and accrue benefits and may still be called back into work. As such, they would not usually be allowed to start working with a new employer if their contract prohibits additional employment unless the existing employer specifically agrees.
Tips for employers when using gardening leave
Gardening leave is one of the many tools at an employer’s disposal to help protect against possible mischief by an employee during their notice period. This is especially important if the exiting employee has valuable and transferable client relationships, where a period of gardening leave can be used by the employer to align themselves with clients before the employee leaves and the clients follow. Still, employers should always exercise caution when deciding to place an employee on gardening leave, weighing up the pros and cons of keeping the exiting employee away from the business whilst retaining them under contract.
The following practical tips can provide employers with a number of useful ways in which an effective gardening leave strategy can be implemented for key employees. However, expert legal advice should always be sought for employers looking to introduce gardening leave provisions for the first time. Employers accustomed to using gardening leave should also ensure that the relevant contractual clauses are clearly drafted moving forward, and go no further than is reasonably necessary to protect the legitimate interests of their business.
- Include carefully drafted provision for gardening leave within the employment contracts of all senior and key employees, making them aware from the outset of the nature and extent of these contractual provisions and how this will impact them if they’re employment is terminated. In this way, the employer will maximise the likelihood of compliance.
- Tailor any gardening leave clause to suit the role, seniority and notice period of the employee in question, ensuring that the scope of any clause is sufficient only to protect the legitimate interests of the business without unreasonably restricting the employee’s right to move on. In this way, the employer will maximise the likelihood of enforceability.
- Make contractual provision to reduce the period of any post-termination restrictions on the employee’s activities by the amount of time spent on gardening leave. In this way, the courts will be more likely to enforce any restrictive covenant, where any further period of restraint following termination of the contract will be reduced.
DavidsonMorris’ employment lawyers support employers with all aspects of contract termination and employee exits. Working closely with our experts in HR, we provide comprehensive guidance on employment contract drafting, negotiating exit packages and developing policies and documentation to minimise legal and reputational risk while ensuring commercial goals are achieved. For help and advice on the use of garden leave and other tools such as NDAs relating to employees exiting the organisation, speak to our experts.
Garden leave FAQs
Is garden leave a bad thing?
There are both pros and cons to garden leave. It can help to protect the employer’s business by preventing the employee from contacting clients or accessing confidential information, but it can be costly as the employee must still be paid.
Why do they call it gardening leave?
Gardening leave is where an employee is suspended on full pay during some or all of their notice period. It’s so called because the employee is kept away from the business but able to spend time pursuing hobbies, like gardening.
What are the rules of garden leave?
The rules of garden leave will often depend on the nature and extent of any garden leave clause within the employee’s contract although, generally speaking, the employee will be asked to stay away from work, colleagues and clients.
Can you start a new job while on gardening leave?
During gardening leave, an employee must observe the implied duty of fidelity, as well as any express contractual restriction on starting a second job. This means the employee will not be allowed to work for anyone else during this period.
Last updated: 12 June 2023