Garden leave, or gardening leave, is an atypical leave type, which is not so much of an employee benefit, instead acting as a protective measure for the company.
In this article we’ll explain everything you need to know about garden leave, and help you understand when to use garden leave, why, and how to use it effectively.
Key Takeaways:
* Garden Leave, or Gardening Leave, is when an employee leaves their job and is asked to stay away from the workplace for the remainder of their contract.
* Outgoing employees usually still receive their regular benefits and pay.
* Garden Leave is most common in the UK, Australia and New Zealand, and often used for C-suite employees or those with access to sensitive information.
Garden leave is when an employee remains under contract and on the payroll, but the company requires them to stay away from work. It usually applies during a notice period leading up to the termination of their employment contract.
Gardening leave is more commonly used in the UK, Australia and New Zealand, and is not as common in the US, though it may be seen in high-level corporate jobs, such as C-suite positions, primarily in the finance industry.
During garden leave, the employee is on “leave”. They’re still technically an employee, their contract and the terms of their contract still apply, but their employer instructs them not to come to work.
The employee will typically still receive their regular pay and benefits, unless there is a specific (and legally applicable) garden leave clause in their contract that says otherwise.
Garden leave can apply when a worker resigns from their job or the employer chooses to terminate their contract. The period of gardening leave will typically cover the usual notice period (e.g. two weeks’ notice that may be required when quitting one’s job), though in some cases may last a lot longer.
While on garden leave, the company may bar then employee from entering the company’s premises, and may require that the employee returns any company property, such as smartphones, computers, or company files.
The term garden/gardening leave is used because it suggests that the employee is free to spend their time on hobbies or doing things around the house (e.g. gardening), rather than working.
See this example from the US Securities and Exchange Commission (SEC) of a separation agreement between uniQure, Inc and their outgoing Chief Operating Officer for a real-life case of gardening leave.
Garden leave can be used in a number of situations, most of which are meant to protect the employer’s business interests from damage that may be caused from the outgoing employee.
Here are the most common situations to put someone on gardening leave:
Garden leave will often be used to prevent an employee from accessing confidential or sensitive information, such as confidential company data, proprietary information or financial data, during their notice period.
Workers’ effort and care towards the job will often drop off once they know their employment is coming to an end, so the company may choose to put the employee on gardening leave if their job is such that any mistakes could cause serious harm to the company.
Similarly, the company may feel there is a risk of the employee intentionally causing harm or sabotaging the company’s operations while on their notice period, particularly when the employment did not end on good terms.
Departing employees may try to take the company’s clients with them, which is common if they are moving to a new employer in the same industry, or embarking on their own solo venture. Gardening leave allows the company to hand over clients’ accounts to a new employee and limit contact from the person who is leaving.
Gardening leave can be similar to a non-compete clause. The company may use garden leave as a way to pay the outgoing employee not to take a new job for a competing company in the same industry for a certain length of time.
A company may use garden leave to support the handover process, and allow the employee’s replacement to step into their new role immediately, without the outgoing employee’s influence.
Outgoing employees may become uncooperative and/or bring down morale around the workplace as their employment winds down. Thus, the company may feel it’s more beneficial to pay them to stay away from the office during this period.
Though it’s less common, the term gardening leave is sometimes used when an employee is facing disciplinary action or is the subject of an investigation, and is required to stay away from work to prevent them from causing problems, interfering or influencing the investigation.
(This is more often referred to as “administrative leave”.)
Generally, employees are entitled to the same pay and contractual benefits while on gardening leave.
They are still under contract, and the terms of employment contracts still apply during garden leave.
In most cases, the employee may not seek other employment during this time. However, this is contingent upon their employment contract. If there is nothing written against taking another job while under contract, the company will likely not be able to enforce such a rule.
The exception is if the employee’s contract specifically mentions garden leave, and has a clause stating something different, such as that they will receive less than their regular pay, or that their benefits will cease during this time (this may not be legally enforceable, though, depending on the jurisdiction).
Garden leave can prevent serious harm to the company by outgoing or disgruntled employees – however, it comes at a cost, so is not suitable for all cases.
Here are the pros and cons to consider:
Pros:
Cons:
To help you understand it better, here are some answers to some of the most commonly asked questions about gardening leave.
A garden leave period can vary greatly in length.
It may be as little as 1-2 weeks, if it only covers the employee’s notice period after handing in their resignation.
However, it can also last as 6-12 months, in cases where a company uses gardening leave to prevent the employee leaving to work for a competitor. Garden leave of this length is very rare, and typically only used for high-level or senior employees, such as CEOs or other C-suite executives.
In most cases, as long as the company still maintains their responsibilities in the employment contract up until the employee’s departure, gardening leave is legal to enforce.
Companies are usually within their rights to prevent an employee from coming to work, as long as they still pay the employee.
A longer garden leave period may be trickier without a clause in the employee’s contract, particularly if they try to prevent them from ending their contract to go to work somewhere else.
Most US laws do not cover garden leave. Exceptions include Massachusetts, which mentions garden leave in a new law passed in 2018, and Illinois, which has a clause in the Freedom to Work Act covering common garden leave situations.
Some other states have laws against non-compete clauses, which may interfere with the purpose of putting someone on garden leave, but don’t render it illegal as long as the company is not stopping the employee from seeking other employment.
For complete legal advice, make sure you seek out an employment law professional in your jurisdiction.
Garden leave often carries a negative connotation, as it implies a lack of trust from the company that the employee will act in good faith during their notice period.
However, more often than not, it is not personal. The company uses garden leave as necessary due diligence to protect their interests, not an implication that they cannot trust the outgoing employee.
Yes, employees still receive their regular pay during the garden leave period.
The company will usually pay their regular salary during this time. The exception is if the employment contract has a clause that says otherwise, which the employee has read and agreed to, and which does not break any relevant laws.
Usually, yes. Unless there is a legally enforceable clause saying otherwise,, the company likely needs to continue to provide any benefits offered in the employee’s contract, including healthcare and fringe benefits.
The employee may not accrue leave or earn service-based benefits during this time, though this may require a specific clause in their contract stating as such.
A person on gardening leave is usually asked not to come to the office or participate in any work activities. It’s usually within the employer’s rights to prevent the employee from entering the office while they are on garden leave.
Different locations have different laws regarding what employees are allowed to do while on garden leave, particularly when it comes to new employment.
A common use for garden leave is to prevent employees from taking their knowledge and skills directly to a competitor. However, some states or countries prevent companies from enforcing non-compete clauses or restricting the right of employees to seek work elsewhere.
Employers are usually free to put an employee on garden leave, without requiring their consent, if the employee has given their notice of termination, assuming it doesn’t breach their contract in any way.
The employer would not, most likely, be allowed to place an employee on gardening leave for an extended period of time and prevent them from leaving the job without the employee’s consent, or a rock-solid clause in their employment contract.
PILON stands for Payment In Lieu Of Notice, and is a common alternative to garden leave.
PILON is used when the company wants to end the employee’s contract immediately, instead of letting the employee work out their notice period.
Instead of the employee staying with the company for two weeks (or however long the notice period is), or being put on gardening leave for this time, the company pays them for what they would have earned during this period.
PILON serves a similar purpose to garden leave, preventing any harm that may cause from an employee who has already checked out. The main difference is that they are no longer legally under contract – the employee will stop receiving any benefits, but will also be free to seek employment elsewhere and will no longer have any obligation to the company.
Garden leave is expensive, it can affect relationships and the reputation of your company, and it can get into murky legal waters, so you’re best to avoid it if it’s not necessary.
However there are some cases where gardening leave is necessary, and some industries and positions where it’s common practice.
Consider the potential harm that outgoing employees might cause, and the likelihood of this happening, and use this to decide whether the expense and complexity of garden leave is necessary or not.
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