Garden Leave and Settlement Agreements
What exactly is garden leave (also known as gardening leave)?
When you resign, or are dismissed, in certain industries it is common for you to be placed on something called ‘garden leave’. You might also hear it referred to as ‘gardening leave’, but this is exactly the same thing and is just an evolution of language use.
The origin of the term has two angles – it describes the idea that you may want an employee out of the way, and ‘out of the house’ therefore ‘in the garden’. It has also developed the meaning relating to the idea that as an employee is being forced to stay at home so all they are good for is gardening!
During garden leave, you would still be contracted to the employer, but there are certain conditions which you need to meet, the main ones normally being that you do not attend the workplace, you cannot contact customers or employees, and that you have an obligation to remain loyal to the employer during the period.
Technically, garden leave can only be enforced on you once you have resigned with notice or been dismissed with notice. If your employer says that you must stay away from work at any other point in their employment then this will be a type of suspension, not garden leave.
Common restrictions during garden leave
An employee can be restricted from:
- Contacting suppliers, clients and customers
- Contacting colleagues
- Attending the workplace
- Accessing work emails or computer systems
- Accessing work databases
- Downloading confidential information
- Contacting or working for competitors
- Retaining use of company car, laptop, smartphone etc where these are for work purposes only and not considered benefits – you remain entitled to receive all benefits during garden leave.
However, as the employee, you will be expected to be available to provide assistance to their employer in the event that they require information or support within the given notice period. Clear rules will be found in an employee’s contract under the garden leave clause.
Why does garden leave exist?
Garden leave is commonly used by employers as a way of protecting themselves and their resources from employees who are leaving employment. They may be worried that you will use your notice period to acquire information to take with them when they finally leave. Most jobs require a certain amount of confidentiality, and will involve employees being privy to protected information and business plans.
One motivation behind employers putting an employee on garden leave when they depart the company is to prevent them from immediately acquiring a new role working for a competitor, and using recent knowledge that they have gained in their previous position to put their new employer at an advantage. Garden leave also gives an employer the opportunity to build new relationships with the employee’s clients, during a period in which the employee cannot contact them.
Common situations where an employee would be put on garden leave:
- If there is a good chance that the employee will join a competitor, the employer may want to introduce a new employee to clients and have time for them to settle them in before the past employee is free to start a new role as they may try and steal their old clients as soon as they do.
- The employer may be concerned about the enforceability of post-termination restrictions or restrictive covenants in their employee’s contract, and so want to protect themselves at least for the duration of the employee’s notice period.
Reasons an employer might put an employee garden leave, but where pay in lieu of notice would be more common:
- There are concerns that the employee staying at work while completing their notice period will have a negative impact on their fellow employees.
- The employer is worried that the employee will either share negative views about the company with customers or clients.
- There is a chance that the employee will download confidential information about clients to take with them.
- Check if your employer has a contractual right to put you on garden leave
- Ensure you continue to receive all your benefits
- If you want to end your garden leave early, seek to agree this with your employer in the first instance
Garden leave or pay in lieu of notice?
If you have been put on garden leave, but think that you have grounds for negotiating pay in lieu of notice instead, we may be able to help. As well as endeavouring to get employees an increased exit package, when reviewing a settlement agreement we also go through all terms and conditions with a fine tooth comb. Once you sign a settlement agreement (and it has been countersigned by an employer and independent solicitor as is required), it is a legally binding contract. You need to take care to make sure that the terms that you are agreeing to will not impact your ongoing job prospects or earnings.
Always read the contract!
As always, it is worth checking your employment contract when you know you will be leaving your job to understand exactly where you stand with your employer. Most employment contracts now specify that the employer has the right to put an employee on garden leave if they resign or are dismissed.
In some circumstances where there is not a garden leave provision in an employment contract, an employer may be in breach of contract if they send you home with no work, even if you are still on full pay. This is because the Courts have increasingly been willing to imply that employees have a ‘right to work’, and so this is why garden leave needs to be specifically mentioned in an employment contract to be enforceable. This is a relatively recent development in the world of employment law, as it used to be more widely assumed that employees did not have the ‘right to work’, and that provided that they continued to receive their pay and benefits, at any time in their employment their employer could require them to stay away from work without the employer breaching contract. This used to be the case even if there was no mention of a garden leave provision in the employee’s contract – which is now not the case.
Garden leave: good or bad?
Whether or not garden leave (or gardening leave) is viewed positively or not by an employee depends entirely on their individual circumstances. Some employees see it as a paid holiday, while others feel as if they are heavily restricted in their actions, are desperate to get on finding a new job, and believe it could be detrimental to their ongoing career.
It’s important to note that many garden leave clauses will include restriction on not just employment with a competitor, but also on competitive activities. This could include setting up your own business in competition with your previous employer.
Do you have grounds for termination of garden leave?
If you are put on garden leave you are still contracted by your old employer so you are not allowed to ‘rejoin’ the job market until your notice period is over. If you want to be released from a garden leave clause in your contract, it is worth first taking the initial step of simply asking your employer. If you explain your situation they may be sympathetic and receptive to releasing you from garden leave, especially if you were a good employee and are planning to move to a non-competitor, or a new industry sector.
Some employees choose to take a risk and refuse to be put on garden leave, instead starting work with a new employer during the time immediately after leaving. If you do this your employer is totally within their rights to sue for damages, although in most cases it would be a very hard claim for them to win as they have to prove a loss resulting from the breach of contract (the breach of contract being you starting work with another employer when the garden leave clause in your contract forbids you from doing so).
It is more likely that your employer would apply for an injunction to prevent you from working elsewhere during the remainder of your notice period. If your employer has a contractual right to put you on garden leave, and you are going to a competitor, this will be relatively straightforward for your employer to obtain.
An important aspect of leaving any employment which should not be forgotten is also making sure that you leave a role with a good reference, and refusing to abide by garden leave restrictions can put this in jeopardy. At Monaco Solicitors we have often negotiated with employers so that employees who may have left their employment during a dispute can leave with a positive reference – this can be a condition written into the settlement agreement. Read more about obtaining references in our article on this subject.
Garden leave used as grounds for constructive dismissal claim
If you do not have an express garden leave provision in your contract you could claim that your employer is in breach of their contract with you. In reaction to this breach of contract, you may have grounds to claim that you have been constructively dismissed. It can be easier to argue this claim if you can show that you need to work to preserve your skills so being excluded from the business has had a detrimental fact on your ongoing work life and ability to earn an income.
A valid claim of constructive dismissal can cause your notice period and restrictive covenants in your contract to become void. If you would like to find out if a constructive dismissal claim could be relevant in your situation, get in touch for a free consultation with a senior lawyer by filling in our online case details form.
You can also read more about constructive dismissal in our detailed article.
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