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Garden Leave

Why is garden leave used?

The practice is often used to prevent employees from gaining access to the latest commercially valuable information or important customers and employees, especially when they are leaving to join a competitor.

How can garden leave be imposed?

Imposing garden leave generally requires an express right in the contract of employment. The main ingredients of a valid garden leave clause are that (1) the employer has no obligation to provide work, (2) the right to exclude an employee from work, (3) the right to prevent contact with customers, (4) the right to prevent the employee from doing other work and (5) an indication of how an employee will be compensated for any loss of bonus or commission. The employer must also take care not to commit any serious breach of contract during the period of garden leave that would entitle the employee to resign.

What if there is no garden leave clause in the contract?

There is no general right to place an employee on garden leave. In the absence of agreement, an employer must show that that there is a right not to provide work to an employee. This will require consideration of the terms of the contract of employment. Other factors such as commission arrangements, the nature of an employee’s job and the need to exercise skills may also become relevant.

How is garden leave enforced?

If there is a breach, or a substantial risk of a breach, of the garden leave provisions then an employer can apply to the Court for an interim injunction to enforce the provision. The Court is only likely to enforce a garden leave clause if an employee is joining a competitor, but will usually grant a remedy more readily than in the case of restrictive covenants since the employee has notice obligations and is paid for any period of inactivity during garden leave.

If an employee opposes the application then the Court may apply similar considerations as in restrictive covenant disputes, including the duration of the period of garden leave and the particular effect on the employee’s skills and remuneration. The Court can enforce a period of garden leave and thereafter an employee’s restrictive covenants, but will consider the combined effect of this before doing so.

What is the alternative to garden leave?

An employer can remove an employee by electing to terminate an employee’s employment and pay in lieu of part or all of the employee’s notice. The absence of an express contractual right to do this however, this may amount to a breach of contract and invalidate any restrictive covenants. Alternatively, the employee may be placed on alternative duties for part or all of the notice period if there is an express right to do so in the contract of employment, or if the nature and duration of these duties is reasonable.

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