What are garden leave clauses?

‘Garden leave’ is where an employer requires the employee to stay at home on full pay during their notice period. Except in limited circumstances the right to put an employee on garden leave must be effected by way of an express clause. Placing the employee on garden leave means that the employee remains employed and subject to their terms and conditions, and so it is a useful tool where the employee is going to work for a competitor or there is a risk they may damage the employer’s business in some way.

Are garden leave clauses enforceable?

Having an express garden leave clause is a good place to start but it will have to be reasonable to be enforceable, in the same way as a restrictive covenant – there must be a legitimate interest which the employer seeks to protect and the clause must be limited to what is reasonable to protect that interest (J M Finn & Co v Holliday [2014] IRLR 102).For example, the employer should consider the duration of the garden leave. An employee could challenge the duration if the reason for the garden leave is to protect confidential information and that information has a limited shelf life or, where being at home will impact the employee’s ability to earn money (see below).

Although the concept of garden leave is generally accepted, there are cases where employees have successfully argued that they are entitled to keep working. Examples of this are where the role was specific and unique, the skills would grow stale if not practised, the skills require regular use and contemporary knowledge of the market and where the employee needed to work to earn a bonus which formed a substantial part of his pay. These factors were examined in William Hill v Tucker [1998] IRLR 313 and SG and R Valuation Service v Boudrais [2008] IRLR 770. However, case law has also underlined that there is no absolute right to work. There must be work for the employee to do and they must be ready and willing to do it.

Must employees get paid during garden leave?

Generally, garden leave clauses provide for an employee to be paid during garden leave and whether or not an employee financially suffers as a result of the clause will impact whether it is reasonable and enforceable. However, the courts have enforced clauses which have affected an employee’s earnings for a short period of time where the employee has shown an unwillingness to work or intended to breach the requirement to work notice while working for a competitor.

Post-termination restrictions

Post-termination restrictions are drafted to run from the date of termination. Case law has established that generally where a period of garden leave is added on to the period of restriction and the combined effect goes beyond what is reasonably necessary to protect an employer's legitimate business interests, then the period of the covenant should be reduced by the period of time spent on garden leave. However, recent cases have demonstrated that the court is willing to take a flexible approach. In Tullett Prebon v BGC Brokers [2010] IRLR 648 the court considered that it could exercise a discretion to enforce part of a period of restrictive covenant on top of the period of garden leave as was appropriate to protect the employer’s legitimate interest. This was repeated in the of Tradition Financial Services v Gamberoni [2017] IRLR 698 where the court upheld a 3 month garden leave clause in combination with a 6 month non- compete clause as it accepted evidence that a 9 month restriction was the industry standard (Mr Gamberoni was a stock broker) and that it was a reasonable period of time to protect client relationships and find a replacement.