What Is Garden Leave?
A garden leave refers to the period during which an employee stays away from the workplace or works remotely during their notice period. The employee remains on the payroll but is neither permitted to work nor to commence any new employment during this period.
Key Takeaways
- Garden leave is a transition period that keeps employees on the payroll but away from the workplace before termination.
- Employees are prohibited from working for competitors or starting new employment during garden leave.
- This practice safeguards a company from potential sabotage or loss of proprietary information.
- During garden leave, employees are usually restricted from accessing the office, confidential documents, and specific coworkers.
- Primarily used in the U.K., Australia, and New Zealand but introduced in Massachusetts in 2018.
Understanding Garden Leaves
Although the term may evoke images of leisurely days at home, the restrictive nature of garden leave can make it less appealing. Put in place during the termination or resignation of an employee, it ensures they have no involvement in work activities or access to sensitive information. The aim is to protect the company from any harmful actions the employee might undertake.
Reasons for Instigating a Garden Leave
Employers may initiate garden leave to prevent potential negative behaviors during an employee’s notice period. Concerns like uncooperativeness, deterioration of workplace morale, and potential leaking of sensitive information can motivate this decision.
When and When Not to Use Garden Leave
The judicious use of garden leave involves evaluating its impact. Key questions include assessing business risk, transition planning, legal restrictions, and the optimal duration.
Rights and Obligations
Employees on garden leave continue to receive their salary and benefits but may lose out on bonuses or accrual payments as per their contract. Employees are also expected to maintain availability for company needs but typically cannot access company property or data.
Garden Leave Clauses
Garden leave clauses are often included in contracts, particularly for senior staff. Not having a garden leave clause can open up the employer to potential legal disputes and breach of contract allegations.
Pros and Cons of Garden Leave
For Employers
Pros:
- Ensures availability for queries
- Prevents potential negative actions before departure
- Protects sensitive company information
- Restricts leaving employee from rival employment
Cons:
- Can be expensive, especially for high-salaried employees
- Produces minimal to no productive work
- Legal complexities and changing laws
- Negative public or employee perception of enforced leaves
For Employees
Pros:
- Continues to receive a paycheck
- Reduced responsibilities
- Opportunity to job search, though limited
- Potential to earn bonuses or commissions
Cons:
- Restrictions on new employment
- Possible dissatisfaction with non-productive period
- Potential career stagnation
- Negative personal and professional impact from isolation
Garden Leave in The U.S.
While traditionally used outside the U.S., garden leave was introduced by Massachusetts in 2018, requiring a minimum of 50% salary during this period. Other states like Illinois have adjusted their laws regarding non-compete conditions affecting garden leave.
Example of Garden Leave
An example includes a 2019 separation agreement by uniQuire, Inc., placing their COO on garden leave from Aug. 19-31. During this period, the COO had no access to facilities or electronic systems, illustrating the typical limitations and conditions of a garden leave.
What Do People Do During Garden Leave?
Employees on garden leave produce minimal to no work. They retain their salary but are typically relieved of their previous duties, and the expectations for this period are generally outlined in advance.
Can I Start a New Job While on Garden Leave?
Employees are often contractually restricted from starting new employment during garden leave. Courts may consider it a breach of contract if an employee prematurely leaves for a new job.
Does Garden Leave Exist in The U.S.?
Yes, especially in states like Massachusetts and Illinois, and it also has some traction in sectors like finance in New York, despite certain legal restrictions.
What Are the Rules Around Garden Leave?
Generally, garden leave requires advance notice and usually lasts 30-90 days. During this period, the employee remains on payroll but is relieved of most employment duties and restricted in their interactions and workplace access.
The Bottom Line
Garden leave serves as a corporate safeguard during employee terminations, ensuring the protection of business interests by temporarily restricting the employee’s work activities and access to sensitive information and assets before their final departure.
Related Terms: employment termination, notice period, non-compete agreement, employee resignation.
References
- The General Court of the Commonwealth of Massachusetts. “Acts (2018) Chapter 228. Section 21”.
- Illinois General Assembly. "(820 ILCS 90/) Illinois Freedom to Work Act".
- FTC. “FTC Announces Rule Banning Noncompetes”.
- New York State Bar Association. “NYSBA NY Rules of Professional Conduct (2021)”.
- U.S. Securities and Exchange Commission. “Exhibit 10.3”.
- Warner Goodman LLP. “Can I Work for Someone Else During my Garden Leave?”
- Thomson Reuters. “Garden Leave Provisions in Employment Agreements”.
