Q: What is gardening leave and how can it protect my business?
A: Gardening leave is a tool used by employers to protect their business when a worker's employment is coming to an end. It is widely used for senior members of staff and is becoming an increasingly common clause in employment contracts.
Employees are placed on garden leave at the start of their notice period until their last date of employment. During this time, they continue to be employed by the company, but they are not required to attend work. The notion is named after the idea that people could stay at home and work on their gardens. The member of staff continues to receive their normal salary during this time and must receive their normal contractual benefits also.
In order to place an employee on garden leave, there must be a garden leave clause in their contract of employment. Telling your staff to stay away from the workplace and failing to give them work, even while continuing to provide them with their normal pay and benefits, creates a significant breach of contract risk.
Garden leave protects businesses because the employee continues to be bound by the contract of employment, even though they are not required to carry out work. This means the employee is bound by the implied duty of fidelity and any express contractual terms regarding working in competition with their employer or carrying out a second job. As a result, the employee cannot begin a role in a competing business until the end of the garden leave.
Ensuring the employee stays away from the workplace also protects the business by making sure they cannot access sensitive or confidential information during their notice period. This is vital when the employee is a senior member of staff who could access time-sensitive information or if they have knowledge of a critical contract or future product. They will also continue to be bound by any contractual terms regarding confidentiality so cannot use their knowledge to negatively affect the business.
The employee is also generally forbidden to contact any colleagues, customers, clients or suppliers during garden leave. This ensures staff cannot use their notice period to solicit any colleagues or clients away from the business, either to a competing business or a business set up by the ex-employee themselves.
The alternative for employers is to make a payment in lieu of notice. The disadvantage is that this brings the contract of employment to an immediate end and the employee stops being bound by their contractual terms. Although post-employment restrictive covenants will take effect from this point, these only protect the business against specified grounds and will need careful drafting to ensure they can be enforced against the former member of staff.
Peter Done is managing director of Peninsula