What is Garden Leave?

Whenever someone leaves a job, whether by choice, redundancy or dismissal, there is usually a period of notice before the last day of employment.

The length of this notice period depends upon a number of things:

• Length of service with the employer.
• What is specified in the employment contract.
• Whether it is a dismissal, redundancy or resignation.

Normally notice to leave employment should be given in writing by either the employee or the employer and the notice period will usually start from the date specified in the letter. Whether the employer requires the employee to work their notice period is dependent upon the employer and the terms of the employment contract.

An exiting employee may be required to:

• Work their full notice period.
• Leave at any time during their notice period.
• Leave immediately, and be offered Payment in Lieu of Notice (PILON).
• Take up the offer of Garden Leave.

These options must either be offered by the employer or agreed with the employer, because if the employee does not get agreement to leave the workplace earlier than their notice period states, they then could be in breach of contract if they do not work the notice period. In addition, if the employee leaves before their notice period ends, the employer only has to pay them for the time that they have worked.

If the employer shortens the notice period or offers payment in lieu of notice (PILON), then the employer will make a payment to the employee instead of the whole or part of a notice period.

The person ceases to be an employee from that date, the employer ceases to provide other contractual benefits such as health care, company vehicle etc., and the employee is free to take up alternative employment from that date. However, the employer cannot force an employee to agree to a PILON if it is not a clause in the employment contract.

The employee may have a case for breach of contract if they are dismissed before their notice period ends, even if they receive a PILON.

Another alternative to working the notice period is Garden Leave: however, there are significant differences between a PILON and Garden Leave.

What is garden leave?

Garden or Gardening Leave emerged in the 1980s, originating in the Civil Service and the Financial sector. When an employee resigns, or is given notice through redundancy or dismissal, the employer may choose to place that employee on Garden Leave. So, what actually is Garden Leave?

The Chartered Institute of Personnel Development (CIPD) defines Garden Leave as: “Garden Leave is the term used to describe the situation where an employee is required by the employer to remain away from work (perhaps doing the gardening!) during the whole or part of the contractual notice period”.

Garden Leave is a business strategy that employers can use to protect their business interests when an employee who may pose a business risk to an organisation, leaves the organisation through resignation, dismissal or redundancy. Instead of working their notice period, the employee is placed on Garden Leave.

The employee remains bound by the express and implied terms of their Contract of Employment, in other words, remains an employee, during their notice period but they are required to not:

• Perform any service for the organisation unless specifically asked to.
• Attend any of the organisation’s business premises.
• Use any company equipment.
• Have any business contact with clients, suppliers, other business contacts and other employees.

In return, the employer maintains all contractual benefits to the employee, including salary, holiday accruement, flexible benefits etc. for the period of the Garden Leave.

A period of Garden Leave cannot exceed the employee’s normal notice period, and may not be enforceable if the notice period exceeds six months, as an Employment Tribunal could determine this period is longer than what is necessary to protect the interests of the business. Any organisation considering Garden Leave clauses should take legal advice.

Some organisations take the opportunity to use the employee on Garden Leave to complete “special projects”, usually away from the workplace, with little or no contact with other employees.

When should garden leave be offered?

Organisations considering using Garden Leave as part of their employee exit strategy should ensure that they have stated this clause in the employees’ Contract of Employment.

This is so that employees are fully informed at the start of their employment with the organisation that should they resign, be dismissed or be made redundant from their role, the organisation may implement Garden Leave for part or all of their notice period. This does not mean that the organisation has to use this strategy for all leavers, but it gives them the option to do so if they feel that it is required.

Organisations may want to implement this employee exit strategy if, for example, the employee:

• Is of an executive or senior management level whose exit from the organisation may impact the strategic direction and decision-making of the organisation during the notice period.
• Has worked closely with loyal clients and there may be risks of persuading their top clients to take their business elsewhere.
• Has access to business sensitive information that may be taken to a competitor or used to establish their own business.
• May cause disruption or detriment to the workplace and business during the notice period.

Can garden leave be refused?

If an organisation places an employee on Garden Leave without an express entitlement to do so, that is, that it is not a specific clause in the Contract of Employment, it may be seen as a breach of contract. However, most Employment Tribunal cases have suggested that there is no implied contractual right to work, but simply a right to be paid. So should an employee choose to refuse Garden Leave, an Employment Tribunal may decide that it is the employee who is breaching the contract by refusing. Employees should always take legal advice before making any decisions.

If an employee requests that they are placed on Garden Leave when they tender their resignation, the employer has the right to refuse. However, many employers may find that it is to their benefit to agree to this as part of the agreement of terms for leaving their employ, as it can limit disruptions in the workplace.

Why is garden leave used?

A Garden Leave strategy aims to protects the employer’s business interests by enabling the employer to exclude the employee from its business for the notice period. This is so that the employer has time to put plans in place to mitigate any negative impact of the employee’s exit.

Here are some examples of why Gardens Leave may be used:

A hairstylist has worked at a salon for a few years, and during that time has built up a loyal client base; their regular clients make up almost 20% of the salon’s business. When the stylist decides to leave the salon, there may be the potential to lose up to 20% of business, so as soon as the stylist resigns, the salon immediately places them on Garden Leave for their notice period.

This gives the salon time, most usually a month in these roles, to put plans in place to mitigate the impact of the loss of the stylist such as, preventing the stylist from taking clients’ contact details, and reallocating the clients to other stylists before the exiting stylist can inform the clients that they are leaving, and perhaps have the clients follow them to a new salon.

This example features a hairstylist, but can apply to any profession that involves client relationships, such as, but not limited to, sales reps., recruitment consultants, or training providers.

Senior executives will usually have a notice period of between 3 and 6 months. An organisation will often have a clause in the employment contract that states that they will place exiting senior executives on Garden Leave to mitigate any risks to the business. Garden Leave removes an exiting senior executive from strategic planning and decision-making activities that will impact the future direction of the organisation.

They will not be privy to any business sensitive information during their notice period, and any information they may have retained before their notice may either have been amended or be time sensitive by the time the notice period expires.

This clause can also have the effect of deterring headhunting, where a senior executive is “poached” by a competitor, because there would be such a long period of time before the senior executive could take up their new appointment.

Some organisations use Garden Leave for exiting employees, whether they are leaving of their own choice, being dismissed or being made redundant, to ensure that they prevent any negative disruptions in the workplace. An exiting employee may be disgruntled and as such cause detriment to the workplace.

By placing the exiting employee on Garden Leave, the organisation removes the problem from the workplace, as they cannot make contact with employees during their notice period. It can also help any new employee taking over the role to do so without interference from the previous postholder.

Other reasons that Garden Leave is used may be that the organisation is so annoyed that the employee is leaving that they just want them gone but cannot breach their contract by cutting the notice period. Or, an employee may want to negotiate Garden Leave with their employer as they feel that during the notice period they will not be engaged in their role and will contribute little to the organisation as they had already mentally left the role.

When can garden leave be used?

As noted earlier in this article, any employer who wishes to place an employee on a period of Garden Leave is best advised to first ensure that there is an express Garden Leave clause in the Contract of Employment.

Then a Garden Leave clause may be triggered when, for example:

• There are privacy and security concerns, and the employer needs to restrict an employee’s access to company information immediately from the point of resignation, dismissal or redundancy.
• The employee has been dismissed, been made redundant or has resigned but the employer doesn’t want them to come to work during their notice period, or to start a new job during this period either.
• Where an employee has been dismissed with notice – This is often the case with redundancies – But the organisation is concerned that should the employee be required to work that notice period, it would have a detrimental effect on the business.

Any organisations considering invoking Garden Leave clauses should check all legal implications and weigh up the benefits of the strategy against the costs involved. An organisation may decide that alternative strategies such as payment in lieu of notice (PILON) and a settlement agreement with a Post-Termination Restrictive Covenant may be a preferable option to both themselves and to the employee.

PILON allows an individual’s employment to be terminated immediately without them needing to complete or work their notice period. Instead, the employer pays the exiting employee the amount they would have earned had they worked their full notice period. It leaves the employee free to commence alternative employment immediately.

A Post-Termination Restrictive Covenant prevents a leaving employee from taking clients or key employees from their former employer, or from working for a competitor.

What happens when employees are on garden leave?

Because the usual aim of placing an employee on Garden Leave is to protect the business interests, employers will normally inform the employee that their Garden Leave will take effect immediately. The length of the Garden Leave period could be for a few weeks or few months and will depend on the length of the employee’s notice period.

When an employee is placed on Garden Leave and they begin their notice period, they may be asked to complete any tasks that they are actively involved with, and/or they may be asked to participate in a handover. The handover may include providing the employer with all work equipment such as security passes, laptops, mobile phones etc. with their corresponding passwords.

An employer can require the employee to make themselves available during the Garden Leave period to answer any queries or to complete handovers. So, it may not be possible, without prior agreement, to take holidays.

The employee will often be informed that they may not make contact with any of the employer’s clients or business contacts, including other employees, or attend any of the organisation’s premises whilst on Garden Leave; to do so may be a breach of contract and/or a breach of confidentiality.

If the employee has a company vehicle, they may be able to retain use of the vehicle through the Garden Leave period, but this will be dependent upon whether the vehicle use is part of the employee’s compensation package.

The employee will also be required to resign any personal professional memberships taken out in the organisation’s name and paid for by the organisation.

During the Garden Leave period the employee will continue to receive their remuneration package as their employment contract continues throughout Garden Leave. The employer remains under an obligation to perform all the terms of the contract including the payment of salary and the provision of all contractual benefits.

Conversely, the employee is still employed by the organisation through the duration of the Garden Leave period, and as such is still subject to the remaining provisions in their Contract of Employment including compliance with policies and procedures. They are also required to carry out reasonable management instructions.

Employees on Garden Leave are not allowed to engage in any other employment during the notice period as they are still under contract with their current employer. They may, however, be able to negotiate with their employer to be allowed to take on voluntary work, although the principle of Garden Leave is that the employee does not engage in any work unless required to do so by their employer.

Is garden leave a bad thing?

There are always pros and cons with any business strategy, and this is true with Garden Leave. There are downsides for both the employer and the employee.

For the employer – If they do not have a clear and well-drafted Garden Leave clause in the employee’s Contract of Employment and they decide to place an employee on Garden Leave, and it has not been agreed to by the employee in writing, the employer exposes themselves to the risk of claims of breach of contract. The employee could then resign and claim constructive dismissal. In addition, any rights to enforce Post-Termination Restrictive Covenants may be lost.

Employees placed on Garden Leave could, in some circumstances, be non-compliant with the terms of the Garden Leave and, for example, begin a new role with a new employer before the notice period ends. In these circumstances the employer has an option to take the employee through the organisation’s Disciplinary process for misconduct in breaching their employment contract.

The employer may also decide that it may want to pursue an action for damages against the employee, invoking an order or an injunction in urgent matters, preventing them from benefiting from that breach of contract.

An employer should also consider whether the benefits of instructing an employee to take Garden Leave outweigh the costs associated with it. In many cases, especially if the period of Garden Leave is extensive, for example upwards of 3 months, any benefits may be far outweighed by the costs of keeping an unproductive employee under contract.

For employees – For some roles there is a need to keep working in order to maintain a professional or occupational skill level, so Garden Leave may cause this skill level to suffer and may put the employee at a disadvantage when seeking new employment.

In cases where the employee’s remuneration is dependent on the work they do, for example if they work on a basic salary and commission, they will be put at a disadvantage by being placed on Garden Leave because the employer may only pay the basic salary for the period of Garden Leave.

An employee on Garden Leave will be unable to start a new role until the end of their Garden Leave and their employment contract ends. This could be incredibly frustrating for an employee as they will be unable to have a fresh start or they may lose out on job opportunities, particularly if a new employer wants an immediate start. Some employees may also feel isolated without being able to contact colleagues until after the end of the notice period.

In conclusion

Garden Leave, PILON and Post-Termination Restrictions are not mutually exclusive and can be used together for maximum effect. But, in practice, it is really important that an employer does not use them to go beyond what is reasonably necessary to protect their “legitimate business interests”.

In all circumstances, employers should take legal advice about all the implications of having a Garden Leave clause in the employment contracts of their employees. All employees being asked to agree to an employment contract with a Garden Leave clause should also check out the legal implications before accepting and signing the contract.