If you’re a new employer or are growing your business rapidly and workforce changes are gathering pace, you may be coming across difficult management situations for the first time.
One such scenario that can prove awkward to navigate is when you have important employees leaving for new pastures and you find yourself having to protect your business. In these situations, sometimes you have to tread carefully and put the business first. A useful tool you can use here from time to time is known as ‘garden leave’.
In this article, we’ll be looking at garden leave in-depth, so that you can understand how it works and why it can prove helpful when certain employment relationships come to an end.
What is garden leave?
Garden leave is the common term used to describe a situation when an employee is placed on a period of enforced paid leave at the end of their employment instead of working through their notice period.
Why would I consider putting an employee on garden leave?
When you’re terminating an employee’s employment, or an employee has decided to leave your business, and that individual:
- is very senior; and/or
- has a role involving regular contact with critical stakeholders (such as key clients or suppliers); and/or
- has access to highly confidential business information or documentation,
then clearly that individual could present a source of risk to your business as they near the end of their employment. This risk is heightened if they’re joining a competitor or planning to set up their own business in competition.
In these circumstances, a decision should be made whether to allow that employee to work through their notice or to prevent them from working and remain at home on paid garden leave. In doing so, this will restrict their stakeholder contact and restrict their access to company systems during their period of notice. This is particularly desirable if they’re joining a competitor or planning to compete via their own new business.
The main objectives with garden leave would be to keep them away from work for a sufficient period of time for the information to become redundant, or for the successor employee to cement themselves with stakeholders and clients, in order to protect key business relationships.
What steps do I need to take to place an employee on garden leave?
1. Check the employment contract – usually the employer must rely on an express garden leave clause in the employee’s contract. In the absence of a clause, there’s a possibility the employee could argue they have a right to work and therefore being placed on garden leave could amount to a breach of contract.
2. Put it in writing – it would not be advisable to place an employee on garden leave orally. It should be done in writing, clearly setting out what this means to the employee in a practical sense (see below).
3. Explain what garden leave means to the employee – during garden leave, the contract of employment continues during that period. As such, the employer must continue to pay their salary and other benefits, and allow the employee to take holidays etc. In return, the employee must abide by their contractual obligations, not work for anybody else during this period, and maintain business confidentiality.
Can a Settlement Agreement be used to implement garden leave?
If the employer is unsure whether they have an existing contractual right to enforce garden leave or a financial compensation package is being agreed upon as part of the termination, then a Settlement Agreement can sometimes be a useful way of agreeing on garden leave arrangements as part of an employee’s exit terms in a legally binding way.
However, legal advice should be sought by both parties in these circumstances. Settlement Agreements can be complex documents, and in any event, it is a legal requirement for the employee to take independent legal advice on its terms and effect for the agreement to be enforceable.
If you need advice and support with regards to putting an employee on garden leave, you should reach out to a solicitor with appropriate expertise. By seeking legal advice, it gives you the peace of mind to know that matters will be handled properly and efficiently so that you can focus on your business.
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About the author
Ashley Gurr is an experienced employment contract lawyer. Ashley has over 15 years of experience in private practice helping SMEs and in-house for an international consultancy group advising on commercial agreements and a multi-national utility giant in a contract strategy role.