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the market place long enough for any information they have to go out of
date.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.
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 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).
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.
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.
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.
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.
