Redundancy - Getting it Right

by Kate Russell

Garden leave

‘Garden leave’ is the term given to a situation whereby an employee is required to serve out a period of notice at home (or ‘in the garden’). During this period the employee continues to receive all salary and benefits but is prohibited from commencing employment with new employers until the gardening leave period has expired.

You will usually find a garden leave clause in the contracts of certain employees to:

  • Stop an employee working for a competitor until their notice period has come to a close (so even though they are not in the office, you retain control over them)
  • Keep them away from confidential or sensitive company data and prevent them from misusing this data
  • Stop the employee from poaching customers or colleagues
  • Enable the successor to the role without worrying that the other employee will get in the way.

They may also be used if the employer is concerned that the post-termination restrictive clauses applicable to the employee are not enforceable.

It is usual for companies to put employees who are at risk of redundancy on garden leave. There are good reasons for doing so.

Firstly, employees are often very upset by the news and need time to compose themselves. Secondly, it can be awkward for employees who know that they’re not at risk if their ‘at risk’ colleagues are working alongside them. There is also the possibility that a disgruntled employee may cause damage to the business.

There is no right to put an employee on garden leave unless it is expressed in the employment contract.

Example

When Mr Boudrais and Ms Smith, senior employees of a consulting and advisory company specialising in the hotel sector, resigned from their employment with SG&R Valuation Service Co each gave three months’ notice, as required by their employment contracts. Both were leaving to join a competitor. Almost immediately, the company uncovered evidence suggesting that they were intending to go to work for a competitor, taking confidential material with them.

They were initially put on garden leave, then suspended and told to stay at home on full pay. Mr Boudrais and Ms Smith responded by saying that there was nothing in their employment contracts allowing SG&R to suspend them or to place them on garden leave. They argued that by requiring them to remain at home the employer had fundamentally breached their contracts, entitling them to resign with immediate effect.

The employer asked the court to place the employees on garden leave for the duration of their notice periods, even though there was no express contractual garden leave clause.

The court held that Mr Boudrais and Ms Smith had a right to work, but their behaviour (in particular the specific hostility shown towards the company) had demonstrated that they were not ready and willing to work in accordance with their employment contracts. As such, the company was entitled to place them on garden leave and the court granted an injunction under which the employees remained subject to their contractual and other duties for the three-month notice period.

This case serves to remind us that we should include a garden leave provision in the employment contract. Without it, it can be difficult to keep an employee away from work during the notice period. Garden leave may be possible where there is clear proof of wrongdoing which amounts to a breach of contract or of duty, but this can be difficult to establish.