Garden Leave

Posted in : HR Updates on 14 May 2015
Helen O'Brien
Personnel and Training Services

Suspending an employee on full pay, otherwise known as garden leave is a frequently used strategy by employers for those leaving an organisation to go to a competitor.

An employer should only place an employee on garden leave if there is a contractual right to do so — a specific and enforceable clause in the contract of employment. In the leading case of William Hill Organisation Ltd v Tucker [1998] IRLR 31, the Court of Appeal said that:

“In practice, an employer will need to stipulate for an express power to send his [her] employee home on full pay (ie on garden leave), in all cases which the contract of employment imposes on the employer an obligation to permit the employee to do the work contracted for.”

If an employer puts an employee on garden leave without such a specific clause, then it is technically a breach of contract, entitling the employee to regard themselves as (constructively) dismissed, released from their employment and free to take up a new job.

Furthermore, the employer may lose the right to rely on other parts of the contract, such as post-termination restrictive covenants and confidentiality clause (Credit Suisse Asset Management Ltd v Armstrong [1996] ICR 160).

In such circumstances, where there is no contractual right to place the employee on garden leave, the employer could consider making a payment in lieu of notice (PILON).

How can garden leave be enforced?

If the employee refuses to accept the terms of garden leave (in situations where the employer has a contractual right to send the employee home without providing work), then the employer can seek to enforce it through the courts by applying for an interim injunction.

This injunction is granted as enforcement, not of any duty to work for the original employer, but to restrain the employee from breaching the contractual duty of good faith by competing or working for a rival employer at a time when the individual is still employed, and under an obligation to remain until the expiry of the notice period.

A court will only grant such an injunction if the employer can prove that it is protecting the existence of a legitimate business interest — such as confidential information, business secrets, trade connections, goodwill and protection of the workforce — and that it will suffer a detriment if the employee is not so restrained. An employee proposing to work for a competitor is clearly likely to damage an employer’s business interests.

Garden leave must be enforced reasonably by the employer; the period of restraint should be the minimum period necessary for legitimate purposes. In general, the courts have ruled that the maximum period of garden leave should not be more than six months.

What are the employee’s rights during garden leave?

Although the employee may not be required to attend the place of work and is prohibited from contacting clients and customers or making any statements to the media, the contract of employment continues to exist. The employer must therefore ensure that the employee on garden leave continues to receive salary and all other contractual benefits.

It is not surprising that employers wish to place employees on garden leave — particularly those in the financial sector and senior managers with confidential information and access to a wide range of clients. A period of enforced absence from the workplace for an employee subject to notice of termination has clear attractions. However, as outlined above, it is not without certain dangers.

All contractual clauses relating to garden leave must be carefully drawn. If the employer does wish to rely on such a clause, it should set out the terms applicable during the period of garden leave and state that the employer is under no obligation to provide work for the employee for the entire duration of the employment.

This article is correct at 19/10/2015
Disclaimer:

The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.

Helen O'Brien
Personnel and Training Services

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