Garden leave - lawyer guide for employers and employees

Gardening can be a critical tool in protecting employers business interests when employees leave. Our team regularly advises both employers and employees on gardening leave provisions and disputes.

What is gardening leave?

When a senior employee departs, protecting business interests becomes paramount. Garden leave provides a mechanism for managing this transition period while maintaining legal obligations and protecting sensitive information.Garden leave clauses allow employers to keep departing employees away from the business while still technically employed.

During this period, employees :-

• Cannot start new employment

• Must remain available for work/queries

• Continue to be bound by employment duties

• Maintain confidentiality obligations

• Cannot contact clients/colleagues

• Must not work for competitors

Advantages of gardening leave for employers

While garden leave can appear costly and potentially disruptive, it offers significant strategic advantages for employers when properly implemented. For employees, despite restrictions on their activities, garden leave can provide valuable benefits during their transition period.

For Employers:

• Immediate protection of confidential information

• Time for client relationships to be transferred

• Prevention of immediate competition

• Opportunity to stabilize team

• Clear ongoing employment obligations

• Usually easier to enforce than restrictive covenants

For Employees:

• Full pay and benefits continue

• Time off between roles

• Clear legal status

• Holiday entitlement continues

• Pension/benefits maintained

• May reduce restrictive covenant period

Risks for Employers

Managing legal exposure requires careful attention to both contractual rights and implementation. Employers face several significant legal risks when placing employees on garden leave.

• Unenforceability - courts may not enforce if period excessive or protections unnecessary

• Challenge to restrictions - employee may claim garden leave makes post-termination restrictions unreasonable

• Injunction difficulties - court may refuse to enforce if employer's case not properly prepared

• Damages inadequacy - may struggle to prove loss if employee breaches

• Cost of paying non-working employee - full salary and benefits continue without productivity

• Team disruption - remaining staff may need to cover workload

• Client dissatisfaction - key relationships may suffer from sudden removal

• Market perception - could be seen as overly defensive or heavy-handed by industry

• Competitor advantage - business may lose ground during transition

• Knowledge gaps - critical information may be lost during handover

• Information security - difficult to monitor compliance with confidentiality

• Client poaching - hard to detect subtle approaches to clients

• Team solicitation - informal contact with colleagues difficult to prevent

Risks for Employees

Employees must understand their continuing legal obligations during garden leave. Breaching these obligations can have serious consequences.

• Breach allegations - risk of employer claiming breach of garden leave obligations

• Injunction threat - could face court action impacting new role

• Damages claims - potential liability for employer losses

• Reference impact - behaviour during garden leave may affect references

• New employer patience - risk of offer being withdrawn

• Industry reputation - may be seen as disloyal by market

• Commission issues - ongoing commission payments may be affected

• Benefit complications - impact on long-term incentives such as share options: May affect vesting or exercise rights

Interaction with restrictive covenants

The relationship between garden leave and post-termination restrictions requires careful consideration. Understanding how these protections work together is crucial for effective business protection.

Important considerations include :-

• Whether garden leave counts towards covenant period- most courts now expect garden leave to reduce post-termination covenant periods. Clear drafting needed to specify whether and how periods offset. Best practice is to include express set-off provisions. Without clear drafting, courts likely to reduce covenant period by garden leave served.

• Overlap between protections - need to avoid duplicative restrictions during garden leave and covenant periods. Common overlaps include non-compete, client and staff solicitation provisions. Courts may view overlapping restrictions as excessive. Consider whether same protection needed in both periods.

• Total length of combined restrictions - courts assess reasonableness of total protection period. Combined garden leave and covenant period typically harder to justify beyond 12 months. Length must relate to time needed for information to become stale or customer relationships to decay. Longer periods need strong justification.

• Reasonableness of overall protection - consider cumulative effect of all restrictions. Courts look at total burden on employee. Need to demonstrate why each element of protection package necessary. Consider stepping down restrictions over time. Remember stronger justification needed for longer/broader restrictions.

• Impact on enforceability - poor drafting of interaction between garden leave and covenants can invalidate both. Need clear provisions on how restrictions work together. Consider including severance clauses. Remember excessive combined protection risks entire package being unenforceable.

• Need for clear drafting - express provisions required on how periods interact. Specify whether garden leave counts towards covenants. Clear definitions needed of restricted activities. Include mechanism for calculating offset periods. Consider fall-back positions if primary restrictions found too broad.

How to enforce garden leave breach

The starting point is to ensure garden leave rights for employers are contractual, so are in the employment contract.

Court attitudes towards garden leave enforcement continue to evolve, with recent cases emphasising the need for proportionality and legitimate business interest. Understanding which employees can reasonably be placed on garden leave, and under what circumstances, is crucial for both drafting clauses and implementing them effectively.

Courts are more likely to enforce garden leave against employees who:

• Hold senior management positions

• Have significant client relationships

• Possess confidential information or trade secrets

• Work in highly competitive industries

• Have technical knowledge that needs protecting

• Could cause significant damage if competing immediately

Applying for an injunction after breach of garden leave terms

When considering enforcement through injunctions, courts will carefully balance various factors. Speed and evidence quality are crucial for successful applications.

Courts consider:

• Strength of contractual terms - whether clauses are clearly drafted and reasonable.

• Length of proposed restriction - total duration must be justified.

• Evidence of risk to business - clear proof of potential damage needed.

• Balance of convenience - impact on both parties considered.

• Adequacy of damages - whether financial compensation is sufficient instead.

• Conduct of parties: Behavior of employer and employee assessed

How we can help

We provide comprehensive support throughout the garden leave process, helping employers implement effective protection while managing legal risk including drafting garden leave clauses and enforcing provisions.

For employees we review employment contracts, negotiate terms and defend injunctions.

For expert advice on garden leave provisions or disputes, please contact our employment team. We can help protect your interests and manage risks effectively.