When an employee resigns or is terminated, employers must decide how to handle their notice period. One option is garden leave, a practice where an employee remains on the payroll but is not required to work during their notice period. This approach is commonly used in industries where protecting company information, client relationships, and intellectual property is crucial.

In this guide, we will explore what garden leave is, its legal considerations, benefits, drawbacks, and best practices for employers.

What Is Garden Leave?

Garden leave (or gardening leave) is a contractual provision that requires an employee to stay away from the workplace during their notice period while still receiving full pay and benefits. The term originated in the United Kingdom, where employees were metaphorically “left to tend their garden” instead of working.

During garden leave, employees are still bound by their contractual obligations, including confidentiality clauses and non-compete agreements. They cannot start a new job with a competitor or disclose sensitive company information.

Garden leave is particularly common in industries where employees have access to confidential data, trade secrets, or key client relationships, such as finance, law, tech, and senior executive roles.

Why Do Employers Use Garden Leave?

Employers implement garden leave for several strategic reasons:

1. Protecting Confidential Information

Employees leaving a company may have access to proprietary data, trade secrets, or intellectual property. Garden leave prevents them from immediately joining a competitor and using sensitive information against the company.

2. Safeguarding Client Relationships

Employees who manage important clients or accounts may try to take clients with them when they leave. Keeping them away from work during their notice period reduces their ability to influence client decisions.

3. Maintaining Workplace Morale

A departing employee may become disengaged, spread negativity, or attempt to recruit colleagues to their new employer. Placing them on garden leave prevents disruption in the workplace.

4. Enforcing Non-Compete Agreements

Garden leave reinforces restrictive covenants, such as non-compete or non-solicitation clauses, ensuring that employees do not immediately join a competitor or poach employees.

5. Preventing Immediate Job Transitions

By keeping employees on payroll but inactive, garden leave delays their ability to start a new job with a competitor, giving the company time to strengthen its position.

Legal Considerations of Garden Leave

1. Contractual Agreements

Garden leave must be outlined in the employment contract. Without a contractual clause, enforcing it could lead to legal disputes. Employers should ensure that employees agree to garden leave terms before implementing them.

2. Employment Rights

During garden leave, employees are still entitled to full pay, benefits, and other contractual rights, such as bonuses, stock options, and holiday accrual. Employers should clearly define these terms in contracts.

3. Non-Compete and Non-Solicitation Clauses

While garden leave helps enforce restrictive covenants, courts may scrutinize their reasonableness. Employers should ensure that restrictions are proportionate and do not unfairly limit an employee’s ability to work.

4. Local Labor Laws

Different countries and states have varying regulations regarding garden leave. For example:

• In the UK, garden leave is commonly used and legally enforceable if outlined in a contract.
• In the US, enforceability depends on state laws. Some states, like California, heavily restrict non-compete agreements, making garden leave less practical.
• In Australia and Canada, garden leave is allowed but must be reasonable and clearly stated in contracts.

5. Breach of Garden Leave

If an employee breaches garden leave by joining a competitor or leaking confidential information, employers may take legal action, such as seeking an injunction or pursuing damages.

Pros and Cons of Garden Leave

Pros for Employers

✅ Protects company interests – Prevents immediate access to competitors and secures confidential data.
✅ Ensures a smooth transition – Gives the company time to reassign responsibilities.
✅ Reduces workplace disruptions – Minimizes negativity and potential poaching.
✅ Reinforces restrictive covenants – Strengthens non-compete and non-solicitation clauses.

Cons for Employers

❌ Costly to maintain – Employers must pay the employee without receiving work in return.
❌ Legal risks – Without a contractual clause, enforcing garden leave may lead to legal disputes.
❌ Potential talent drain – Extended absences may prompt other employees to leave.

Pros for Employees

✅ Paid time off – Employees receive full salary and benefits while not working.
✅ Time to plan next steps – Allows employees to prepare for their next career move.
✅ Less workplace stress – Avoids awkwardness of working after resignation or termination.

Cons for Employees

❌ Delays new job opportunities – Employees cannot start a new job immediately.
❌ Limited networking – Restrictive clauses may prevent them from contacting industry contacts.
❌ Potential isolation – Some employees may find inactivity frustrating.

Best Practices for Implementing Garden Leave

1. Include Garden Leave in Contracts

Clearly outline garden leave policies in employment contracts to ensure legal enforceability. Specify duration, pay, benefits, and restrictions.

2. Use Garden Leave Selectively

Reserve garden leave for employees in sensitive roles, such as executives, sales personnel, or those handling confidential information.

3. Maintain Employee Engagement

While on garden leave, employees may still be required to respond to occasional work queries. Keep communication lines open to ensure a smooth handover.

4. Define Benefits and Bonuses

Specify whether employees on garden leave will continue to receive performance-based bonuses, stock options, or commission-based incentives.

5. Monitor Compliance

Ensure employees on garden leave do not engage in unauthorized work, breach confidentiality agreements, or contact clients.

6. Be Mindful of Legal Risks

Consult with legal professionals to ensure garden leave policies comply with labor laws in your jurisdiction.

7. Balance Company Interests with Fairness

While garden leave protects business interests, it should not unfairly restrict employees’ career progression. Striking a fair balance minimizes legal risks and maintains a positive employer reputation.

Alternatives to Garden Leave

If garden leave is not suitable, employers may consider alternative options:

1. Payment in Lieu of Notice (PILON)

Instead of requiring an employee to serve their notice, employers can terminate employment immediately and provide a lump sum payment covering their notice period.

2. Non-Compete Agreements

Restricting an employee from joining a competitor for a specific period after leaving, though enforceability varies by region.

3. Restrictive Covenant Agreements

Using non-disclosure, non-solicitation, or confidentiality agreements to protect company interests.

4. Immediate Termination with Severance

If an employee poses a risk, offering severance pay in exchange for an immediate exit may be an alternative.

Conclusion

Garden leave is a valuable tool for employers seeking to protect business interests, maintain confidentiality, and prevent disruptions when employees resign or are terminated. However, it must be carefully managed to ensure legal compliance, fairness, and financial feasibility.

By incorporating clear contractual terms, enforcing policies appropriately, and considering alternatives when necessary, employers can use garden leave effectively while maintaining a positive working environment.