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Garden Leave not just a bed of roses

1.04.2014

Employers have long since recognised the problematic nature of post-termination restrictive covenants in their contracts.  Nevertheless they still need to protect confidential information and/or prevent competition.  This has lead to an increased use over the years of Garden Leave
provisions particularly for senior employees. 

Garden Leave provisions arise most commonly where the employee gives notice but the employer does not require them to attend work for the notice period.  The employee continues to be paid their full wages under the contract but is removed from the workplace environment so that they are unable to continue relationships with key clients or set up a competitive business during that time.  During this period the employee remains bound by his or her contractual obligations including the full scope of the implied duty of fidelity. 

Employers should however be aware that abuse of Garden Leave provisions can make the courts use the principals that they are currently using in relation to restrictive covenants. Any restrictive covenants that the contract contains must be discounted by the period of time that an employee is left on Garden Leave and there is a growing emphasis on an employee’s right to work and exercise his or her skills.  An employee who works in a constantly changing environment where skills and contacts quickly become stale may choose to challenge an overlong Garden Leave provision as a restraint of trade.  Employers should as with restrictive covenants consider exactly what they need to protect and tailor any provisions exactly to that need.  Trying to do something which does more will often result in nothing being enforceable and therefore afford no protection at all.  The advantage of Garden Leave over a post-termination restrictive covenant is that an employer can look at exactly what it needs at the time of enforcement.

Employees facing the prospect of a long period of Garden Leave which they are anxious to get out of will look at engineering a claim for constructive dismissal.  They will say that the employer has breached the employment contract and therefore can no longer have the benefit of the rest of the terms namely the Garden Leave term.

The key piece of advice in dealing with Garden Leave or indeed post-termination restrictive covenants is that less is more.  Employers very often simply cut and paste a template restrictive covenant without any thought as to how it meets their particular business needs.  Contracts that are renewed annually may be able to justify a year’s post-termination restriction or indeed a year’s Garden Leave but the longer the period the greater the risk.  Courts are anxious not to keep people out of earning a living for any longer than is absolutely necessary.

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