Garden Leave – a win-win solution?

During an employee’s notice period and irrespective of whether it was the employer or employee who provided notice of termination, by exercising a contractual garden leave clause it is possible for an employer to ask an employee not to carry out any work for the employer and not to attend their usual place of work, whilst remaining on the payroll.

Garden leave is different to an employee receiving a payment in lieu of notice (“PILON”). Where an employer makes a PILON, the employee’s employment is terminated immediately without the need to work their notice period but a payment is made to the employee in respect of the salary they would have earned had they worked their full notice period. A PILON may be more appropriate where there has been a relationship breakdown or an employer has dismissed an employee, for example for poor performance, and has concerns about the employee being disruptive if they work their notice period.

One of the main purposes of garden leave (also known as ‘gardening leave’) is to protect an employers’ business interests. As such, an employee will also be required to cease making contact with clients or customers of the employer, together with any suppliers and possibly even their colleagues. In such circumstances, an employee may also be required to returncompany equipment, such as a company mobile or laptop. An employer is under no obligation to provide any work to the employee for all or part of the employee’s notice period. Asan employee remains employed, there is no financial detriment as they will continue to receive their pay and contractual benefits in the usual way.

The advantage from an employer’s perspective is that the employee will remain bound by the terms of their contract of employment and will be prevented from working for a competitor or indeed any other employer for the period in question, including in a self-employed capacity. An employee must however always remain available for work during any period of garden leave, meaning that employers can raise queries and request assistance with a handover, or even bring the employee back to work if circumstances change, with the employee being obliged to cooperate in the same way as if they were still attending work.

Ideally there needs to be a legitimate business interest for putting an employee on garden leave. This is because if an employer wishes to enforce a garden leave clause, it is likely a court will only do so by way of an injunction, if it has been used to protect the employer’s position, for example, if it is known that the employee is proposing to go and work for a competitor. Any period of garden leave should be kept short, as it will be more difficult to enforce if it is for a lengthy notice period.

If the contract of employment contains post termination restrictions governing the employee’s activities after they leave the business, it would be prudent for the period of restriction to be reduced by the corresponding period of time spent on garden leave. A court may be less likely to enforce the restrictions if the employer is trying to prevent an employee from working for a longer period of time by taking advantage of both a garden leave period and subsequent post termination restrictive period.

Employers need to ensure that their employees’ contracts contain a relevant and appropriately worded clause permitting them to be put on garden leave. If there is no such clause in the contract, an employee may insist that they have the right to work.

From an employee’s perspective, mostly, they will be only too willing to be put on garden leave during any period of notice. They are essentially getting paid to stay at home, but do not have to perform any work. It also makes it a lot easier to find suitable alternative employment if they do not already have a new job lined up.

At Askews, we offer free reviews of your contracts of employment so that you can achieve your business aims, ensure that your business is protected and avoid common pitfalls. Please enquire by contacting Lianne Payne, Senior Associate Solicitor and Head of Employment, via email at lianne@askewslegal.co