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.
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. However, as 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.
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.
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.
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.
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.