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Everything You Need To Know About Garden Leave
Garden leave describes the practice whereby an employee leaving a job (having resigned or otherwise had their employment terminated) is instructed not to attend the workplace or perform duties.
It is generally accepted that employees continue to receive all their usual benefits, such as health insurance and full pay, during this period.
Why is it called garden leave?
Popularised by the 1980’s satirical sitcom Yes Minister, the term’ gardening leave” or “garden leave” is frequently used in the United Kingdom, the Commonwealth, and former British colonies such as Hong Kong.
It’s a semi-derogatory term used to evoke the image of British civil servants on suspension at home in limbo with nothing to do but tend to their gardens.
It sounds like a cushy paid holiday to the employee, but in reality, garden leave exists primarily to protect the employer from the possibly damaging actions of a leaving employee.
The termination of employment inevitably brings commercial risks and concerns to employers. Whether the employee is leaving voluntarily or the business has decided to terminate for some other reason, there will be recruitment, training, and in some cases, litigation costs that follow shortly after.
What is the garden leave meaning around the world?
The fundamental basics of Garden Leave differ slightly in Hong Kong, Singapore, and the United Kingdom.
Garden leave in the United Kingdom
An employee placed on garden leave is required to refrain from entering their workplace while serving the length of the gardening leave.
Like a non-compete agreement, employees cannot perform their work functions or interact with the company’s business partners.
However, The employee is required to be available and ready to help with any handover duties to the replacement employee.
Any garden leave clause not expressly stated in the employment contract can be debatable as a breach of contract if the employer enacts the garden leave.
You can take the gardening part literally if you want, especially during the three days of summer.
Garden leave in Hong Kong
There are two ways to put an employee on garden leave in Hong Kong.
- Put a clause in the employment contract. This is the most straightforward and fuss-free way to do it. Exercise of the clause after the employee has given their notice or rightly terminated is at the employer’s discretion.
- Alternatively, if a garden leave clause isn’t included in the employment contract, the employer may only initiate garden leave with the employee’s consent.
Garden leave clauses are legal and widespread in Hong Kong, but they are all subject to tests of enforceability. If the clause is challenged, for a court to uphold the clause, a garden leave must:
- Serve to protect a legitimate interest; and
- Last for a reasonable period.
The test is left intentionally vague to allow the courts to consider all the factors surrounding any issues.
Legitimate interest can include the protection of an employer’s goodwill fostered with clients and suppliers, ensuring the stability of an employer’s workforce, or preventing the dissemination of any confidential information that the employee might otherwise possess.
Garden leave in Singapore
An employee can be placed on garden leave if:
- The employment contract expressly states the Garden Leave clause, thus, the Garden Leave can be enacted in such an event.
- In the event that the employment contract does not express the clause, it is arguable by the employee if the employer wishes to act on the Garden Leave clause.
Garden Leave clauses, when enacted, mean that the employee will still be an employee of the company, though they do not need to report to work.
The purpose of the garden Leave is to allow a proper and full handing over of duties and responsibilities to the incoming/ replacement employee.
Similar to the factors in Hong Kong, the Singapore Court leaves the requirements for breach of Garden Leave somewhat vague and highly dependent on the context of the situation.
Therefore, it is advisable to understand and clarify the terms of the Garden Leave before signing and committing to the employment contract.
Why would a business put an employee on garden leave?
At first glance, it may not seem logical to pay someone not to work for you. But it is appropriate for some businesses to allow the employee to remain employed but physically not be called upon to work every day of their notice period.
For example, the employer might want to stop employees from performing their regular duties immediately due to conduct or capability concerns.
However, it might also want to retain the employee for the notice period, typically requiring them to stay home to keep them away from a competitor for as long as possible.
The commercial benefits of garden leave in the UK are not one-dimensional, but let’s look at a practical example:
An example of when to use garden leave
Jeff is a specialist sales representative for an online business management platform and has been headhunted by a competitor.
They offer him a benefits package that exceeds what he can expect to receive in his current role, so he decides to make a move and accept their offer.
The competitor knows that Jeff is currently working in an industry where their clients operate, so they hope to gain some trade knowledge from him (and hopefully some new clients).
Having informed his manager of his resignation, Jeff has a notice period of three months before he is officially released from his duties, in which he could collate company data, trade secrets, and contacts that will benefit him in his new role.
Placing Jeff on garden leave keeps him out of the marketplace long enough for any information to go out of date.
In most cases, this can only be achieved if an express garden leave clause in the employee’s contract allows their duties to be varied or withdrawn during the notice period.
Having a garden leave clause may help deter a competitor from poaching employees in the first place and increase the employer’s bargaining position with any disaffected employees.
Employer obligations in a garden leave clause
An implied right to work can be overridden by an express term of the contract. Therefore, if an employer wants to put an employee on garden leave in the UK and retain maximum control over their activities during the notice period, it is helpful to rely on express contractual provisions, such as:
- A right to withdraw the employee’s duties and exclude them from the premises. This will prevent the employee from resigning and claiming constructive dismissal when put on garden leave.
- A restriction on carrying out other business activities during employment (commonly relaxed to allow limited shareholdings in good faith for investment purposes only). This will draw the employee’s attention to the purpose of the garden leave, which is to restrain them from carrying out any business activities and allow an order enforcing it to be framed more precisely.
- An option to require the employee to do alternative duties during the garden leave period. Or to require the employee to perform only some of their usual contractual duties, which are expressly assigned to the employee during the period. This potentially allows the employer a greater degree of control over the employee during the garden leave period. This may mean that the clause is easier to enforce, as it makes it harder for the employee to run an “imposed idleness” argument.
- Confirmation that the employee will continue to be paid during garden leave and will remain entitled to all contractual benefits.
- A requirement that the employee should keep their manager informed of their whereabouts during garden leave. And how they can be contacted during their normal working hours.
- A limitation or prohibition on the employee having contact with clients or other employees during the period. In most cases, an employee on garden leave will have no reason to contact clients or colleagues. The employer may want to use the period to cement its relations with its client base and take pre-emptive measures against any team moves.
What are the risks of enacting garden leave without a clause in the employment contract?
If there is no express contractual right to put an employee on garden leave, an employee can argue that to do so is a breach of contract because they have an implied right to work.
Employees may use this to extract themselves from their employment without giving due notice by claiming the breach is repudiatory.
An employer will need to weigh this risk against the damage that may be done if the employee continues to work during their notice period.
What are the obligations of the employer and the employee if garden leave commences?
The employment contract continues to subsist during any period of garden leave. Therefore, the employer must continue to:
- Perform all the terms of the contract.
- Pay salary at the normal time.
- Provide all other contractual benefits, such as medical, pension, and company car.
- Allow the employee to exercise their standard holiday entitlement and calculate holiday pay as usual.
- The employee must also abide by all their contractual obligations during the entire garden leave period except (in most cases) the obligation to work for their employer. In many cases, these will be negative obligations only. For example, not working for any other business, maintaining loyalty towards the employer, and not using or divulging any of the employer’s confidential information. However, in some circumstances, the garden leave clause may provide for alternative duties to be carried out during the garden leave period.
The employment contract continues to exist during garden leave, so it is logical to assume that any duties implied in that contract would continue to apply as they did before notice was given.
However, that is not always the case, and when it comes to the employee’s implied duty of good faith and fidelity, there are different schools of thought as to the effect of garden leave on an employee’s obligations.
Garden leave and post-termination restrictions
Garden Leave does not operate alone. Instead, it works alongside the aforementioned contractual clauses that form a class of covenants (legal speak for a type of agreement) that restrict employees from doing certain things after termination.
The principle behind post-termination restrictive covenants is wholly in line with the foundation behind the garden leave—to protect the business.
While highly beneficial to the employer, these covenants can be incredibly unfair to the employee.
For example, a non-compete agreement (NCA) prevents the employee from seeking employment in the same field after termination while receiving no remuneration or benefits.
In Hong Kong, a three-month restriction is generally acceptable, but the period can be up to six months.
Non-disclosure agreements (NDAs) aren’t as restrictive to the employee, but any employment contract with an NCA will likely have an NDA.
How to deal with garden leave
In the majority of cases, the garden leave period affords an employee the luxury to search for continuing employment while simultaneously protecting the employer’s interest.
However, garden leave clauses won’t do any justice to employees whose income is derived primarily from commissions or other incentive-based remuneration, as they won’t be working during the garden leave.
Garden leave clauses and post-termination restrictive covenants are one of the many forms of parallel negotiation and contracting when an employment relationship is possible.
Together they form one of the many tools that protect the employer’s business and the employee’s livelihood.
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