Gardening leave has for many years been used by companies as a protectionist measure within senior executive employment contracts, ensuring any departure of key individuals has minimal impact on the reputation and ongoing success of the organisation in question. It does not come without costs and risks however, and below Clarendon Executive’s Emma Kieran examines the pros and cons any HR professional might want to weigh up before granting garden leave to an exiting executive.
Garden leave, or gardening leave, came to prominence after it was used during an episode of Yes, Prime Minister in 1986 and describes the practice where an employee leaving a job – having resigned or otherwise had their employment terminated – is instructed not to attend the workplace or perform duties but remains on full remuneration.
Typically, employers use gardening leave for strategic reasons. Placing an executive on garden leave protects the employer’s business by enabling the employer to exclude the employee from its business for the notice period – thereby keeping the individual away from clients, colleagues and confidential information. It also prevents the employee from being able to commence new employment with a competitor, or starting their own business out of enmity.
It is commonly used for senior employees who have greater access to restricted or confidential information or who have secured a new role with a competitor. During gardening leave an employee is still under contract and therefore bound by all contractual clauses including a duty of confidentiality.
The ultimate aim of garden leave is to keep the employee out of the marketplace for long enough to ensure that any information they have will go out of date, or for the employee's successor to establish themselves, particularly with customers, so to protect goodwill.
Garden leave protection, of course, comes at the cost of continued salary payments and benefit provision until the notice period is effectively served.
Employers must ensure things like private health insurance or similar continue until employment has actually ended. If the employee in question has a company car, phone or laptop, whether you need to continue providing these will depend on whether they are a benefit, or a tool of employment, and whether you may require the employee to do anything work-related while they are at home. Anything the employee has for personal use (as well as business use) will need to remain in place, so if they can use their company car for private journeys, they’ll need to keep it.
Employees also continue to accrue holiday during garden leave, even though they are not attending work. You may be able to require them to take holiday during their notice period, but remember when calculating it that you need to include holiday accrued to their actual termination date.
You don’t necessarily need a contract clause entitling you to place an employee on garden leave in order to do so, but there have been cases where doing so has been or may be considered a breach of contract. One example would be a role where part of the employee’s remuneration is dependent on their work, such as commission and bonuses, or if working is necessary in order to maintain a professional level of skill, as in the case of surgeons or doctors. By forcing them to remain at home you are denying them access to such payments.
Even when you do have a gardening leave clause in place, it doesn’t guarantee things will run smoothly. While many view this period as a welcome opportunity to pursue a hobby or relax and regroup, at the old employer’s expense, before taking up a new job, it can be a frustrating time for an employee who wants to get on with their new job or who feels that his/her ability to deliver for the new employer is prejudiced by being kept out of the market. Employees can seek to challenge garden leave by refusing to comply with the old employer’s requirements and starting employment with the new employer regardless. The old employer is faced with letting the matter pass or suing for damages, which is often a lengthy, complex and costly process.
On balance a detailed contract clause, tailored to your business and its unique requirements, is usually a good idea. It avoids any breach of contract claim and also provides clarity for both parties on what garden leave will mean and what you as the employer are entitled to do in these circumstances.
It is however always worth seeking legal advice as employers may find themselves in a financially onerous position if correct procedures aren't followed when placing staff on garden leave – the process, as we’ve seen, is not always as straightforward as it seems.Tagged with: Clarendon Executive | Executive Recruitment | Hiring executive-level candidates | Non-Executive Directors
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