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Garden Leave Clauses: Employment

Garden Leave Clauses

Garden leave is used where contractual notice has been given (by the Employer or the Employee) and the Employer asks the Employee not to come into work, or to work at home or another location for the length of the notice period.

Garden leave may be used, for instance, when an Employee has a new job with a competitor and the Employer wants to ensure that the Employee does not have access to clients or customers and/or information is not gained and passed to the competitor. During garden leave, the Employer must continue to make salary payments and provide all other contractual benefits under the terms of the contract for that same period.

The Employee:

• is not required to attend work but remains subject to the terms of his/her contract of employment for the duration of his/her notice period; and

• is unable to take up alternative employment during the garden leave period.

Whether or not an Employer can place an Employee on garden leave will usually depend on whether the Employee has a specific garden leave clause in the employment contract. A garden leave clause may be in addition to restrictive covenants, which restrict the Employee’s activities once employment has been terminated.

In placing the Employee on garden leave, the Employer must not do anything that could amount to a breach of the contract with the Employee. If the breach is deemed to be sufficiently serious, this could allow the Employee to resign without notice and move straight to the new Employer. Restrictive covenants contained in the contract could then be rendered unenforceable by the breach.

Generally, garden leave clauses are easier to enforce than restrictive covenant clauses and are more likely to be upheld provided the length of garden leave is not excessive. Where a contract of employment contains both types of clauses the terms should not be excessive. As a rule of thumb, garden leave should not be for a period of longer than six months. Employers should also be aware that any period spent on garden leave should be offset against the length of restriction in the restrictive covenant clause.

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