Garden Leave: What does it actually mean?

This briefing explains when a business may be able to place an employee on garden leave.

What is garden leave?

When an employee decides to leave employment or where the employer decides that the employee should leave, the business might want to stop the employee from performing their regular duties immediately. However, at the same time, they might want to retain the employee for the notice period, typically requiring them to stay at home, to keep them away from a competitor for as long as possible. This is known as placing the employee on garden leave.

A business may use garden leave to:

• Keep the employee out of the market place long enough for any information they have to go out of date.
• Enable that employee’s successor to establish themselves, particularly with customers, to protect goodwill.

Having an express garden leave clause in the employment contract may help deter a competitor from poaching employees in the first place and may also increase the employer’s bargaining position with any disaffected employees.

Can the business place the employee on garden leave?

Express contractual rights in the employment contract

If a business wants to put an employee on garden leave, it is helpful to be able to rely on express contractual provisions within the employment contract. For example:

• A right to withdraw the employee’s duties and exclude them from the premises will prevent the employee from resigning and claiming constructive dismissal when placed on garden leave.
• A restriction on other business activities during employment will draw the employee’s attention to the purpose of the garden leave, that is to restrain them from carrying out any business activities, and allow an order enforcing it to be more precisely framed.

No express garden leave clauses in the employment contract

If a business places an employee on garden leave without an express entitlement to do so, a court will consider whether the employee has a contractual right to work. Over the years, most cases have suggested that there is no implied contractual right to work, but simply a right to be paid.

On this basis, placing an employee on garden leave would not be a breach of contract, even without a garden leave clause. However, businesses should be aware that, more recently, courts have seemed increasingly willing to find that employees do have a right to work.

The contract of employment continues to exist during garden leave

The employment contract continues to exist during any period of garden leave.

Therefore, the business must continue to:

• Perform all the terms of the contract.
• Pay salary.
• Provide all other contractual benefits (such as medical and pension benefits).

Enforcing garden leave

An employee will breach their contract if they leave employment without giving notice. If a business wants to enforce a garden leave clause, it should refuse to accept the termination of the contract and suspend the employee for the duration of that notice period. The same applies if an employee seeks to resign with immediate effect claiming constructive dismissal.

Protecting employer’s legitimate interests

It is likely that a court will only enforce a garden leave provision by way of an injunction if it is used to protect the employer’s legitimate interests, such as confidential information.

For example, an employee proposing to work for a competitor is likely to damage the employer’s business interests.

Length of garden leave period

The longer the period of proposed garden leave, the less likely a court is to enforce it in full.

For example, where there is a two-year notice period, it is unlikely that an employer would be able to serve notice and place the employee on garden leave for the whole of that notice period.

Relationship with restrictive covenants

Where an employee is placed on garden leave during the notice period, a court may be less likely to enforce post-termination restrictive covenants.

Restrictive covenants enable a business to protect its interests by restricting an employee’s activities for a period of time after their employment has ended.

It is sensible to limit the period for which the employee can be sent on garden leave as this will increase the likelihood that it will be held to be enforceable. This will be particularly important if the employee has a long notice period. A period of more than six months is unlikely to be enforceable in most cases.

If there are restrictions on the employee’s activities after termination, it is sensible to reduce the period of those restrictions by the amount of time that the employee spends on garden leave immediately before termination.

Maximum length of garden leave

It is sensible to limit the period for which the employee can be sent on garden leave as this will increase the likelihood that it will be held to be enforceable.

This will be particularly important if the employee has a long notice period. A period of more than six months is unlikely to be enforceable in most cases.

If there are restrictions on the employee’s activities after termination, it is sensible to reduce the period of those restrictions by the amount of time that the employee spends on garden leave immediately before termination.

This briefing just provides an overview of the law in this area. You should talk to a lawyer for a complete understanding of how it may affect your particular circumstances.

For further advice and information on Garden Leave, please call 024 7623 1000

Askews Legal LLP – Solicitors in Coventry.