What is Garden Leave?
Garden leave is when an employee cannot work for a company after tendering their resignation or being terminated. Non-compete clauses and other restrictive covenants usually accompany it.
Employers use garden leave to protect confidential information and prevent employees from taking clients or contacts after departing. However, it comes with some drawbacks for businesses.
Garden leave in the UK is a term used in employment contracts and refers to a period during which an employee who is leaving or has resigned from their job is required to stay away from the workplace but remains on the company’s payroll. During this period, the employee typically receives their salary and benefits, even though they are not actively working for the employer.
Key Features of Garden Leave
Critical features of garden leave in the UK include:
- Paid Leave: Employees on garden leave continue to receive their regular salary and employment benefits, including pension contributions, paid holidays, and healthcare benefits, as stipulated in their employment contract.
- Non-Compete Clause: Garden leave is often used when an employee is subject to a non-compete or non-solicitation clause in their contract, which means that during the garden leave period, the employee is prohibited from working for a competing company or soliciting the employer’s clients or employees.
- Continuation of Contractual Obligations: The employment contract remains in force during the garden leave period, and the employee is expected to abide by all terms and conditions of the contract, including confidentiality and non-disclosure provisions.
- Notice Period: Garden leave is typically part of an employee’s notice period. Instead of working out their notice at the office, the employee spends it on leave, away from the workplace.
- Benefits and Responsibilities: Employees on garden leave are still bound by their duties of loyalty and confidentiality to their employer. They may not take on new employment during this time and must not engage in activities that could harm their current employer’s interests.
- Return of Company Property: During garden leave, employees may be required to return any company property, such as laptops, keys, or access cards.
What is the Benefit of Garden Leave?
Employers often use garden leave to protect their interests, particularly when employees have access to sensitive information, trade secrets, or relationships with key clients. The employer can safeguard the employee’s business interests by keeping the employee away from the workplace and competitors during the notice period.
On the other hand, employees benefit from continuing to receive their salary and benefits while exploring new job opportunities without the pressure of being actively employed. However, they must adhere to the terms of their garden leave, including any non-compete clauses, to avoid potential legal issues.
Garden Leave is a Form of Severance
Garden leave, or severance pay, requires an employee to stay away from work during their notice period after they have resigned or been made redundant. This ensures they can’t start working for a competitor while still on the payroll. It’s most commonly used for senior employees with access to critical company information, such as pricing data and high-level technical knowledge.
In addition to protecting sensitive information, garden leave protects the employer’s reputation. The departing employee can’t talk to clients or colleagues about confidential business information. In addition, the employee can keep this information private from competitors or poach customers from former employers.
Despite the benefits of garden leave, it can be costly for an employer. In addition to the employee’s salary, maintaining office space and equipment can also cost the company money. Moreover, it can limit the employee’s networking opportunities and reduce their likelihood of finding a new job.
However, the main advantage of garden leave is that it prevents the outgoing employee from using company property or information. It also ensures that the company can find a replacement before the departing employee starts work for a competitor. Furthermore, it helps to preserve the employer’s reputation and prevents them from getting sued.
Garden Leave Protects Confidential Information
While it may seem counterintuitive to pay an employee not to work, there are several reasons why a company might use garden leave. One reason is to protect confidential information. For example, if an employee is on gardening leave when terminated, they can start working for a competitor once their contract ends. This can prevent competitors from stealing the departing employee’s knowledge. It can also help a business avoid the risk of lawsuits from former employees who might be able to use their confidential information in a new job.
Another benefit of garden leave is that it can enforce non-compete and non-solicitation agreements. These clauses are typically part of an employment contract and prohibit the employee from competing with their employer for a set period after leaving. However, enforcing these restrictions can be challenging. Depending on the situation, it may be necessary to take legal action.
Employees are still paid their salary and benefits during the garden leave period. This can help ensure financial security while looking for a new job. In addition, a company must continue to provide any contractual benefits, such as private health insurance or a company car, until the end of their contract. It is also essential to communicate with the departing employee during this time, ensuring they know their departure is not a surprise.
Garden Leave is a Legal Requirement
Garden leave is a legal requirement for employees terminating their employment contract. The purpose is to prevent the departing employee from using confidential information for a new role and stop them from accessing the workplace or speaking to colleagues, clients or suppliers. It’s also often a contractual requirement in cases of dismissal or redundancy.
Garden Leave can also be a way to comply with any restrictive covenants in an employee’s contract, such as a non-compete clause that prevents them from working for a competitor. The employee can be paid during this time, but the new employer can contact the former employer’s customers freely once the garden leave period has passed.
As well as the financial benefits of garden leave, it also helps to ensure a smooth handover for the successor in the departing employee’s role. This is especially important when sensitive client relationships are involved. It also allows you to recover any equipment the employee has been using, such as laptops and keyboards, which your organisation may own. You can use an asset register tool like Employment Hero to track items to simplify this process. Then, when the employee’s garden leave period finishes, you can collect all assets from them and send them back to the company.
Garden Leave Protects the Employer’s Reputation
Garden leave is a way for companies to protect their reputation during an employee’s departure. It’s common practice for high-level employees to be placed on gardening leave after a company dismisses them, makes them redundant, or accepts their resignation. This prevents the employee from taking up a new job at a competitor for some time. It also helps to ensure that confidential information is not divulged.
However, this method does come with a few risks. Employers must be aware that putting an employee on garden leave can be a breach of contract in some circumstances, especially if the role is one where a significant part of their remuneration depends on work (such as doctors or surgeons). Furthermore, the practice could potentially harm the employer’s reputation, mainly if used when a contract is terminated due to misconduct or a breach of fiduciary duty.
Employees on garden leave usually have restricted physical access to the company building and may not have any physical access to files or confidential business information. They are not allowed to contact any clients or employees during this period. In addition, they must comply with restrictive covenants in their employment contracts that prohibit them from contacting competitors. If they breach the terms of these restrictions, their payments during garden leave will stop.
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