First published: July 25th 2023
Last updated: July 25th 2023
Garden leave refers to a situation where an employee hands in their notice and as their employer, you require them to stay away from the workplace and to stop completing their work from any location prior to the formal termination of employment.
Many employers ask us if garden leave is something they need to consider for their employment contracts.
There’s a range of HR and employment law issues to consider before deciding if your business should have a right to put employees on garden leave.
What’s the purpose of Garden Leave?
Garden leave is typically used by employers when a current employee secures a job with a competitor.
The aim of garden leave is to create a gap between the employee’s existing role and the new role with the competitor.
The old employer may have concerns that the departing employee will use confidential business information, future strategy or business contacts in their new role with the competitor.
Are employees paid during Garden Leave?
This will depend on what the employment contract says but in general, the employee continues to receive their salary during a period of garden leave.
In return, the employee must comply with their obligations under the contract of employment (save for turning up for work and completing their duties of course!) as well as the implied duty of trust and confidence until the period of garden leave expires.
Does my business need a right to put staff on Garden Leave?
There is no clear answer to this question. It really depends on the seniority and expertise of the staff you employ.
If you operate in a highly competitive industry and there is a risk that employees may defect to one of your competitors, a garden leave clause will provide you with some protection against the risk of losing business contacts and confidential business information.
If there is a risk that employees could leave to set up their own business, a garden leave clause could also help reduce the risk of losing customers or vital business information that could be used in a new business set up in competition with your operation.
Essentially, garden leave is used by businesses that are worried about employees poaching business should they leave either amicably or on bad terms.
How will a period of Garden Leave protect my business?
The key protection afforded by garden leave is that it minimises the chances of employees using your most up-to-date confidential business information against you.
In addition, the gap or buffer zone that garden leave creates means that you have a better opportunity to manage any concerns key clients have about the employee’s departure. You can use this time to reassure key clients that it is business as usual and afford the departing employee’s successor a good chance to build a good working relationship with your top customers.
What is the employee’s legal status while they are on Garden Leave?
The employee remains an employee during the period of garden leave. They must observe the terms of the garden leave clause however by staying away from the workplace and stopping all their work activities.
So employee rights and benefits continue to accrue during Garden Leave?
Yes, the employee remains employed and annual leave, salary and other benefits should all continue to be paid during the period of garden leave.
What if I have no Garden Leave clause in my contract? Can I still put the employee on Garden leave?
If you have employees that could go into business against you or join one of your competitors, it’s best to reserve the right to put such employees on garden leave in your employment contracts.
In the absence of a contractual right to put employees on garden leave, you would need to reach an agreement with the departing employee on how they should work out their notice period.
Expert HR advice on Garden Leave and termination of employment
Losing staff is one thing but losing business is another.
Garden Leave is an effective tool in protecting your business against the risk of losing business to former employees.
To ensure your business has measures in place to reduce the risks of losing a senior employee, contact one of our HR experts today on 1800 719 216
