The Ultimate Guide to Garden Leave (Plus When To Use It)

Garden leave is gaining traction in the United States. Employers are increasingly concerned about protecting their confidential information, trade secrets, and customer relationships from departing employees. Technological advances make it easier for people to take valuable information with them when they leave a job, which could damage their former employer’s business.

Garden leave also benefits employees by giving them a period of time to decompress and reflect before starting a new job. This can be especially valuable for people who have been working long hours or under high-stress levels. Some people appreciate the job security and financial stability that garden leave provides, as they continue to receive their salary and benefits during the period of leave.

What is garden leave?

“Garden leave” is a term that originated in the British military. It described the practice of sending an officer on leave but keeping them on the payroll and forbidding them from taking up any other employment during that time. Because they couldn’t work for anyone else, all they could do was sit in their garden.

Today, it’s when someone gets paid not to work. It is a protectionist measure that can be implemented for various reasons. It can have to do with an employee’s non-compete agreement.

Currently, an estimated 30 million workers in the United States are covered by such agreements, a legal contract between an employee and their employer that prohibits employees from working for the competition or themselves for a period of time after employment. Garden leave also prevents an employee from leaving a company for a competing firm and taking time-sensitive intel, trade secrets, or proprietary information with them when they depart.

It can also happen when the relationship between the employee and the employer ends badly. In this case, an employer might be concerned that the employee on notice might engage in disruptive or damaging behavior while in the office. Garden leave can be put into place if an employee resigns or if they were terminated. It usually applies to high-level employees who will be required to stay away from the workplace for a certain period while remaining on the payroll.

The length of the leave depends on the duration of the employee’s notice period. It can be as long or as short as the employer needs it to be, as long as it is within the notice period, typically several weeks or months. The employee cannot work for a competitor or contact clients or colleagues during this time.

The policy protects the employer’s business interests, particularly when the employee who’s leaving has access to confidential information, trade secrets, or key clients. It can also help to prevent that employee from poaching other staff or clients from the company.

Depending on the terms of the employment contract or the agreement reached between the employer and the employee, garden leave can be voluntary or legally mandated. Employers sometimes offer it as an alternative to these restrictive covenants. In others, garden leave may be required by law, such as in the financial services industry in some countries.

How does garden leave work?

In the US, garden leave is a contractual arrangement between the employer and employee that kicks in when an employee leaves the company. The terms and conditions are set out in the employment contract between the employer and the employee.

Pay and benefits can vary depending on the terms of the agreement, but employers usually are required to provide the employee with the same pay and contractual benefits. Some employers require the employee to use any remaining vacation time or paid time off during this period before receiving regular salary and benefits.

On their part, the employee is obligated to follow any restrictions set out in the agreement, such as not working for a competitor or contacting clients or colleagues of their former employer.

HR professionals must ensure that wage and hour laws are followed during this time, including tracking hours worked and paying overtime if applicable. You will also have to confirm that the terms and conditions of garden leave comply with wage and hour laws and that the obligations of both parties are clearly outlined in the employment contract.

Returning to work or termination of employment during garden leave can also vary depending on the terms of the agreement. If the employee returns to work after that period, they will typically resume their position and responsibilities. If you end the employee’s relationship with your company during the garden leave period, they will be entitled to receive any remaining salary and benefits owed to them in terms of your agreement.

The advantages and disadvantages

Advantages for the employer

1. Protection of business interests: Prevents employees from sharing confidential information, trade secrets, or client lists with competitors during the transition period, helping to protect the employer’s business interests.
2. Control over outgoing employees: Employers can retain some control over outgoing employees during the leave period, as they remain on the payroll and are subject to restrictions.
3. Smooth transition: Can provide time for the employer to find a replacement for the employee who is leaving and ensure a smooth transition for clients and colleagues.
4. Avoiding disruption: Can prevent the employee from disrupting the workplace or poaching other employees or clients from the company.

Disadvantages for the employer

• Cost: Employers are required to continue paying the employee during the garden leave period, even if they are not actively working.
• Reduced productivity: Garden leave reduces productivity for the employer, as the employee leaving no longer contributes to operations.
• Decreased employee morale: The use of garden leave can decrease employee morale if coworkers sense that the organization is treating the employee unfairly or is overly restrictive in its employment agreements.
• Difficulty enforcing restrictions: Employers may find it difficult to enforce restrictions on employees leaving, such as non-compete and non-solicitation agreements, during the garden leave period.

Advantages for the employee

• Continued compensation: The employee is still entitled to receive their salary and benefits during the garden leave period, providing financial security during the transition period.
• Time to find new employment: Can provide time for the employee to find a new job without the pressure of immediate unemployment, allowing them to take their time to consider their options.
• Improved work-life balance: The period may allow the employee to take a break from work, providing time to focus on personal and family matters or pursue other interests.
• Compliance with restrictive covenants: May be offered as an alternative to restrictive covenants, allowing the employee to comply with these restrictions without completely restricting their ability to work.

Disadvantages for the employee

• Reduced opportunities for networking: Can limit the employee’s ability to network with colleagues and industry professionals during the transition period, potentially limiting their career opportunities.
• Uncertainty about future employment: The employee may feel uncertain about their future employment prospects during the garden leave period, particularly if the terms and conditions of their next job are still unclear.
• Isolation: The employee may feel isolated from the workplace during the garden leave period, potentially impacting their mental health and well-being.
• Restrictions on future employment: The employee’s ability to work for certain competitors or contact clients of their former employer may be constrained.

When to use garden leave for employees

Make your decision to use garden leave on a case-by-case basis. Consider the specific circumstances of the employee and your company’s business.

Recommend using the policy for employees when business interests may be at risk during the transition period. If the employee has access to sensitive information such as trade secrets or client lists, for example, garden leave prevents them from sharing this information with competitors, poaching clients or employees from your organization, or using the knowledge and skills they gained to benefit the competitor. It can also ensure compliance with these restrictions without completely limiting the employee’s ability to work.

If the employee has a high-profile role in the company, garden leave provides time for your organization to find a replacement and ensure a smooth transition for clients and colleagues.

When not to use garden leave

Use garden leave only when it is a proportionate and reasonable measure to protect the organization’s interests and the benefits outweigh the costs. It’s not a policy to be used in every situation, as it may not be appropriate or necessary in all cases.

If the employee does not have access to sensitive information, is not leaving to work for a competitor, and does not have a high-profile role, garden leave is likely unnecessary.

Additionally, it’s not a reasonable measure when the employee’s risk to your organization’s business is low. It can be expensive as you must continue paying a non-productive employee during the leave period. If the cost outweighs the advantages, it’s not worthwhile.

In some jurisdictions or under certain employment agreements, garden leave may not be permitted or may be subject to specific requirements or restrictions. Ensure that you are familiar with these requirements before implementing this measure.

HR best practices when using garden leave

When drafting a garden leave policy, ensure it’s fair, transparent, and compliant with all applicable employment laws.

1. Avoid discrimination: Garden leave policies must avoid discrimination against employees based on age, race, gender, or disability. The criteria for determining which employees will be placed on garden leave should be based on legitimate business interests, not personal characteristics.
2. Specify the terms of garden leave: Garden leave policies should be specified in the employment contracts of employees who may be subject to such leave. Include the duration of the leave, the conditions of the leave, what the employee is entitled to, and any other relevant information.
3. Compliance with employment laws: Ensure that your policy complies with all applicable employment laws, including wage and hour laws, anti-discrimination laws, and privacy laws.
4. Provide support to employees: You should provide support to employees who are on garden leave, such as career counseling or job search assistance. This will help to maintain a positive relationship with the employee and ensure a smooth transition when they return to work or move on.
5. Be transparent: Provide employees with information about the reasons for the leave, the duration and conditions, and their rights during the leave period. Again, this will help to maintain a positive relationship and reduce the risk of legal challenges.
6. Maintain confidentiality: Maintaining confidentiality about the reasons for the garden leave and any other sensitive information related to the employee’s departure is vital. It helps to protect your company’s business interests and avoids damaging the employee’s reputation.
7. Monitor compliance: Ensure that your policy is monitored and applied consistently and fairly. This can help to avoid legal problems and maintain the trust of employees.

Key takeaways

• Suspension on full pay: Garden leave is a practice used by employers to request employees not to return to the workplace for a period of time while they are still under contract and continue to receive pay
• Protecting your business: Garden leave protects the employer’s business interests by preventing the employee from working for a competitor or soliciting clients, customers, or other employees.
• Salary and benefits: During garden leave, the employee remains under contract and is typically entitled to their salary and benefits but is not allowed to work for the employer or any other company.
• Compliance with the law: Garden leave is useful in certain situations, but it should be implemented carefully and in compliance with all applicable employment laws to avoid legal challenges or damage to employee morale.