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Should I place my employee on garden leave?

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Garden leave (sometimes called gardening leave) is one strategy companies may use to protect their business when an employee leaves, and are regularly used alongside restrictive covenants.  With many businesses facing changes in the current climate, it may be necessary for you to consider this as an option if an employee resigns or if you decide to terminate their employment contract with you.  Our Employment Law team here discusses what garden leave is as well as the pros and cons of using this clause.

What is garden leave?

Garden leave is when an employee does not attend work for some or all of their notice period, though they are still paid their full remuneration. It can apply regardless of whether it was the employee or the employer who gave notice to terminate the employment. During a period of garden leave, the employee must remain available to work and must abide by the terms of their contract of employment, including their obligation to maintain confidentiality. Generally, an employee on garden leave cannot attend the company’s premises or communicate with colleagues and clients.

You can include a garden leave clause in your employees’ contracts of employment, though there is no legal requirement to do so. However, placing an employee on garden leave without such a clause may leave you open to a claim of breach of contract. Having a garden leave clause also helps clarify each party’s obligations when the employee is on garden leave.

Whether or not garden leave is necessary for your business will depend on multiple factors including:

  • the employee’s contract,
  • the employee’s role within your business,
  • the employee’s level within the company,
  • the financial resources of your business.

What are the benefits of placing an employee on garden leave during their notice period?

Garden leave is commonly used for senior employees or executives who have access to sensitive business information. Garden leave can help protect your business by:

  • Keeping the employee out of the market until the information they have is outdated;
  • Excluding the employee from sensitive internal communications such as future business strategies;
  • Preventing the employee from communicating with clients and colleagues and poaching them for another company;
  • Allowing the employee’s successor to take on the role without the previous employee interfering.

While on garden leave, the employee must remain available to work, principally so that they are available to answer any questions or help with a handover.  

What are the risks of placing an employee on garden leave during their notice period?

One drawback of garden leave is that as the employer, you will need to continue to pay the employee their full salary for the entire time they are on garden leave, without receiving any work in return. The employee also remains entitled to any contractual benefits, such as health insurance, bonuses, and a company car.

Employees also continue to accrue holiday while on garden leave; however, you can require them to take holiday during their notice period.

If the employee’s contract does not contain a garden leave clause, there is a risk that the employee will claim breach of contract if they are placed on garden leave. This may be the case where the employee’s remuneration is dependent on the work they do, for example if they work on commission. Another example is where the employee needs to keep working in order to maintain a professional level or skill, such as a surgeon. In these cases, the Employment Tribunal may find that the employee had a contractual right to work, which you as the employer breached.

There is also the possibility that the employee will not accept being put on garden leave and will begin work for a new employer right away. In that case you will need to decide whether it is worth suing them for breach of contract.

When including a garden leave clause in your employment contracts, as with any other form of restrictive covenant, you should seek legal advice in order to ensure that it would be considered enforceable by a Court.  It is unlikely that a garden leave clause would be enforceable if the period of leave is excessive. As the employer, you should be able to show that the length of garden leave is necessary to protect your business interests.

To discuss placing an employee of garden leave, or to have your employment contracts reviewed for enforceability of restrictive covenants, you can contact the Employment Law team today on 023 8071 7717 or email employment@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  We accept no liability for the content of this material.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.