Typically, when an employee leaves a company, they’ll usually work their notice period. However, there may be circumstances when you place them on garden leave, sometimes referred to as gardening leave. This is when an employee is leaving a job, either by way of resignation or termination of contract, and is instructed not to attend the workplace or perform any duties, but remains a fully paid employee of the business for the full period of Garden Leave, bound by the terms of the contract of employment. This can help to keep the employee away from the business but also prevent them from starting work for a competitor straight away.
In this blog, we will be exploring exactly what garden leave or gardening leave is, its benefits and some areas to consider when enforcing it.
What is garden leave?
The term gardening leave is suggested to have come from the fact that during this period, employees cannot work and therefore they can spend their time gardening.
Garden Leave is commonly used for strategic reasons to protect the business and keep the employee away from key relationships, such as employees, customers and suppliers. Putting an employee on gardening leave also helps a new starter taking on their role to do so without interference. Another reason for Garden Leave is to prevent the employee from accessing personal data or commercially confidential and sensitive information. It also means they are unable to enter into a contract with their new employer until after their actual termination date.
The employee is still bound by the terms and conditions of their contract, including confidentiality and post-termination restrictions.
To avoid a breach of contract claim, you must include a contractual provision within the employment contract, to have an enforceable right to send an employee on garden leave.
Pros and cons for employers and employees
Garden leave should not be considered a punishment and many contracts include such contractual obligations during notice periods. Employers use gardening leave as there are various commercial and legal benefits, but equally, there are certain drawbacks. So, is garden leave a bad thing?
Benefits of gardening leave
For the Company:
- It keeps the employee out of the marketplace, preventing them from working for another employer or working in a self-employed capacity until the notice period ends.
- It creates time to find a replacement.
- It enables their successor to establish key relationships with customers and suppliers, but with the departing employee available should they be needed for a handover, or to answer any queries.
- Sensitive information that they may possess becomes out of date or less significant.
- It prevents the exiting employee from contacting/poaching colleagues or clients.
- Unlike pay in lieu of notice, the employee’s salary during garden leave can be paid as normal thereby assisting cash flow for the employer.
For the employee:
- They receive their full salary and have access to all their employee benefits.
- It provides the employee with more free time to develop a new skill, find a new hobby, spend time with family or job search.
Drawbacks of gardening leave
For the Company:
- Cost – the employee remains on full pay but with no productivity in return.
- The employee may well have already taken documents / sensitive information in anticipation of being excluded from the workplace.
For the employee:
- They could start to lose their skills since they are not using them on a daily basis.
- It can have a negative impact on the employee’s emotional well-being as they may find it hard to adjust to having so much free time.
- They may lose out on starting a new job, particularly if their new employer wants an immediate start.
Redundancies and Resignations
Where an employee has been dismissed with notice, which is often the case with redundancies, the employer may use the garden leave clause, particularly where they are concerned that should the employee be required to work that notice period, it would have a detrimental effect on the business.
Employees are contractually obligated to work out their notice period if they resign; however, in cases where employees refuse to work their notice period, the employer may decide to place them on garden leave. See our blog for more information on this. Garden leave may also be used when senior employees – who have greater access to sensitive and strategic information, and generally have longer notice periods – resign and want to accept a position with a new employer/competitor, in order to protect business interests.
Employee rights & employer obligations
The employee will continue to receive their salary for the period of Garden Leave.
Contractual benefits such as holiday entitlement, private medical, and company car (for private and business use) will also need to remain in place throughout the period of Garden Leave, until the actual termination date.
Employees must also continue to be entitled to any statutory benefits such as statutory sick leave, maternity leave and pay, parental leave and pay, and statutory redundancy. They must also continue to have protection against discrimination.
Employee activities & restrictions during Garden Leave
During gardening leave, both parties remain bound by the terms of the employment contract, but the employee is not required to complete any work, attend work, or communicate with colleagues and clients; although the employer can request the employee to provide a handover, or answer queries or even return to the workplace during garden leave and therefore the employee needs to remain available. The employee should continue to adhere to any confidentiality regulations set out in the employee contract.
As such, employees will not usually be allowed to start working with a new employer, although they may be able to negotiate to do voluntary work; and employees should inform their employer if they intend to take a holiday or leave the country while on garden leave.
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Legal implications of breach of contract
Whilst a clause in the contract is not a legal requirement, placing someone on Garden Leave without an express term may be considered a breach of contract. Care must be taken to consider the impact of placing someone on Garden Leave, particularly where part of the employee’s remuneration is dependent on their work, such as commission and bonuses.
A breach of employment contract can occur from either the employee or the employer when there is a failure to adhere to the agreed terms. Whilst legal proceedings are an option for breach of contract, this should generally be considered as a last resort, after any internal action such as mediation.
For example, if an employee is refusing to work their notice period, you could try to claim damages such as financial losses (i.e. your direct and indirect or consequential loss) due to the breach of contract through the civil courts.
Similarly, if an employee breaches their restrictive covenants by accepting a job with a competitor or establishing a similar business to yours, you could apply to the courts for an injunction to stop them.
Where a breach of the employment contract has occurred on your part, either express or implied terms, and the employee can prove they have suffered financial loss, then they can sue and have damages awarded. The maximum compensation an employment tribunal can provide is capped at £25,000. A breach of contract could also result in damage to your business’s reputation.
How employers and employees can challenge Garden Leave
Employees may challenge Garden Leave placement, especially if they are eager to start afresh and join their new employer. Some may even decide to throw caution to the wind and commence employment regardless. The next step must be considered carefully. You could let the matter pass unchallenged – however, this may give the green light to other employees to do the same – or you could sue for damages, a potentially lengthy and costly process.
In order that both parties are crystal clear about what is and is not allowed throughout the period of Garden Leave, it is recommended to detail such provisions within Garden Leave clauses in the contract of employment. Clarity of what will happen if the employee fails to fulfil the requirements should be included in addition to a link with any post-termination restrictions that may be in place.
The process of implementing Garden Leave
As mentioned above, to place an employee on garden leave a valid garden leave clause must be within the employee’s contract, otherwise the process cannot be used. You must also provide a reasonable cause to place the employee on garden leave, before starting the process.
You should write to the employee confirming the arrangements of the garden leave, reminding them of what is expected of them during this period of time.
Impact on Company Culture
As well as protecting the business interests of the Company, garden leave can also be used to protect company culture.
If, for example, you have an employee who is disgruntled, unmotivated, and unproductive, it can make the team feel unsettled and frustrated, so keeping the departing employee away from the office can avoid this. It will also help to alleviate any concerns that the departing employee will try to encourage others to leave too.
UK Employment Law
One of the key employment law developments seen this year is the reform of non-compete clauses. The government has announced its plans to limit the length of non-compete clauses in employment contracts to three months.
The changes will apply to post-termination non-compete covenants only, and will not affect employers’ ability to use non-solicitation clauses, non-dealing clauses and non-poaching clauses as well as notice periods, garden leave and confidentiality obligations. As such, we may see employers introducing longer notice periods or relying on garden leave clauses to restrict the employee from working with competitors.
Remember, since 6 April 2020, in accordance with the Good Work Plan, a written statement of terms (contract of employment) has been a day-one right for employees and this binding agreement must have certain information included.
In Summary: What UK Employers need to know
Placing an employee on garden leave can offer flexibility and protection for a business, ensuring a smooth transition as they leave. However, as we have established, to place an employee on garden leave your employment contracts must contain a valid garden leave clause.
For more help on ensuring your contracts of employment provide protection for your business and peace of mind for you, please contact us and speak to a member of our friendly HR team, who will be happy to help.
How long is Gardening Leave?
In most cases, this would usually equate to the duration of the employee’s applicable notice period, but typically shouldn’t exceed more than 6 months.
Can an employee refuse to go on Garden Leave?
If the employee refuses to go on gardening leave or accept the terms, then the employer may seek to go through the courts to apply for an interim injunction, in order to protect its business. The employee would also be in breach of their contract, providing it contains a garden leave clause.
Can Garden Leave be enforced if it’s not specified in the employment contract?
Forcing an employee to go on garden leave (especially when it is not included in their contract) breaches their ‘right to work’ and therefore may be a breach of contract – even if they are on full pay. A garden leave clause needs to be within the employment contract for it to be enforceable.
How does Garden Leave impact an employee’s pension contributions?
It doesn’t impact – the Company must continue to provide pension benefits during the period of garden leave.
How does Garden Leave affect an employee’s notice period?
The employee is still employed during garden leave and therefore is required to fulfil their notice period, but instead of working, they complete their notice period away from the workplace.
What are the tax implications of Garden Leave for employers and employees?
As the employee receives their salary as normal for their garden leave, it would be taxed in the same way.
Can an employee’s garden leave status be disclosed to other staff or external parties?
This is your choice and will likely depend on the situation. You may choose to tell people, to help them adjust to not having the employee around and help a new starter build relationships with clients, colleagues or suppliers as quickly as possible so that they have a seamless transition.
The alternative is to remove them from the workplace and not disclose anything to your staff or clients. While this may protect your company’s interests, in that they are prevented from sharing any new information, it may lead to questions being asked and assumptions being made.
What happens if an employee breaches the terms of their Garden Leave?
If an employee breaches the terms of Garden Leave, for example by disclosing confidential information, you may be within your rights to proceed with disciplinary action, which could lead to dismissal. As mentioned above, you could sue them for breach of contract but this is timely and expensive.
What happens to work equipment & company property?
Company equipment such as a laptop or mobile phone used purely for work-related activities may be retrieved from the employee during Garden Leave. However, the decision to retrieve equipment will depend on whether the employee will be required to carry out any work-related activities whilst they are on Garden Leave.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact us.
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