When a key employee is about to leave, employers look to minimise damage to their business and may wish to keep the employee away from customers and commercially sensitive information. Often this is done by putting the employee on garden leave during their notice period.
Lisa Branker, employment law expert with Richard Reed Solicitors in Sunderland explains garden leave, its benefits and when it is safe to put an employee on garden leave. She also looks at alternatives.
What is garden leave?
Instead of working out their notice, the employee receives their usual pay and benefits but is prevented from coming into work or performing their duties. It is known as ‘garden leave’ as the employee is free to get on and do the garden.
Why is it a good idea?
Although you are paying the employee not to do any work, there may be good reasons for putting a key employee on garden leave. This is particularly the case if the employee’s contract does not restrict what they can do after leaving the company or they have indicated that they do not think any restrictions are enforceable.
Garden leave buys time during which the employee cannot start work for a competitor. During the notice period, the employee’s knowledge may become out of date, limiting its value to any competitor. The individual’s ability to poach customers and colleagues is restrained, as is the scope for misusing any confidential information.
Occasionally it can be useful where there has been a breakdown in working relations and the workplace would be more harmonious without this individual.
When can you use garden leave?
You need to ensure that the employee has appropriately worded clauses in their contract which give you the right to put them on garden leave. Garden leave clauses should operate regardless of whether the employee resigns, or you give them notice.
What should be included in a contract?
Particularly for employees in senior or specialist roles, they may have a right to be provided with work. If you put employees on garden leave without a contractual right to do so, they may argue that it is a breach of contract. This would allow the employee to walk away sooner and to release them from other contractual restrictions on what they can do after leaving employment with you.
The clause needs to be clearly worded and state, among other things, that the employee cannot carry on other business activities. The garden leave period should not be excessively long, or the employee may be able to challenge it in court.
What if the employee breaches the terms of their garden leave?
If the employee ignores the garden leave clause, for example by contacting customers, the usual mechanism for enforcing it is to ask the High Court to issue an injunction against the employee. The High Court will assess whether this is necessary to protect your legitimate interests, such as connections with customers.
Are there any alternatives?
Depending on the individual’s role, it may be overkill to remove the employee from the workplace and to stop them performing any work at all. Less drastic options that could still protect your business involve restricting the activities that the employee performs during their notice or requiring them to perform suitable, alternative duties. Again, the contract needs to give you the right to do this.
You can include restrictive covenants in the employee’s contract of employment. These aim to protect your business after the employee has left, for instance by restricting them from working for a competitor or preventing them from contacting your customers for a specific period of time. However, these have to be carefully drafted to ensure that they are enforceable.
We can ensure that your key employees’ contracts of employment are appropriately drafted, and we can advise if you have concerns regarding the departure of a key employee.
Please contact Lisa Branker in the employment team on 0191 567 0465 or email [email protected].