An employer's guide to garden leave
Putting an employee on garden leave following an employee's resignation can often be seen as a win-win situation for both the employer and the employee. The employer is reassured that any confidential information known to the employee is potentially made less valuable by the time the employee re-joins the marketplace, whilst the employee receives full pay and benefits during their notice period without having to work.
Does an employee have a right to garden leave?
Unfortunately, the question whether an employee can be put on garden leave, or demand this, provokes the typical lawyer’s response; it depends on the terms of the employment contract.
The courts have previously held that in some circumstances, employees have a contractual right to work during their notice period in the absence of an express garden leave clause in their employment contract.
Therefore, there is no automatic right for an employer to put an employee on garden leave, and therefore, a prudent employer will always include express contractual provisions relating to garden leave to supersede the implied right to work and to avoid the employer being in breach of contract.
Regulating the employee during garden leave
The extent of what an employee can or cannot do during the garden leave period is dependent on how the clause is drafted. Common provisions include restrictions on carrying out other business activities, limitations imposed on client and colleague contact, withdrawal from employee duties and exclusion from the employer’s property.
The courts may not necessarily imply restrictions upon the employee during garden leave, although it may consider a general duty of good faith. Therefore, the relevant activities the employer wishes to prohibit the employee from engaging in must be expressly referred to in the contract. Otherwise, the purpose of garden leave is defeated and the employer may find themselves being short-changed.
The interplay with any post termination restrictions should also be considered. In order to preserve the enforceability of any post-termination restrictions, it is common for any time spent on garden leave to be deducted from the duration of the covenants.
An employer’s duties during garden leave
The employment contract continues as per usual during the garden leave period. Employer's must therefore continue to perform the terms of the contract, pay full salary, provide all contractual benefits and allow the employee to use their holiday entitlement.
The employer’s failure to continue performing its contractual obligations may result in a breach of contract and could also give rise to a difficulty in enforcing any post-termination restrictions.
By following a few simple steps, employer's can enjoy the benefits of garden leave and avoid the pitfalls.
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