10th Dec, 2020

Garden Leave 101: A Quick and Easy Guide


Alexander Boswell, Marketing MSc, Business PhD and SaaS mastermind has got a pretty good grasp of business concepts – at least he thought he did until he decided to leave the corporate world and was given PILON, a term he misunderstood for garden leave. When he sought to clarify this misinterpretation, he found he wasn't the only one with a tonne of questions. Thus, he endeavours to answer every query and doubt surrounding the subject in this comprehensive guide.
        

Redundancies have hit record highs of 314,000 so far this quarter. As a result, Garden Leave (or Gardening Leave) is a term you may have had to make uncomfortable acquaintances with if you or your company are facing tough times.



Garden leave cases as redundancy rates rise.
2020 fourth quarter redundancy rates Source: ONS

        
If you’re an employee and you’ve handed in your notice (or the company has dismissed you), you may also see this kind of term in your contract and wonder what it is. 

So what is garden leave? Here, we’ve provided a quick and easy guide to help you better understand the process as it is in the UK.

     

What is garden leave in employment law?


Garden Leave (or Gardening Leave) describes a contractual clause upon resignation or otherwise dismissed employee. It typically instructs the employee to remove themselves indefinitely from the work environment, cease responsibilities of their role and to not make contact with other employees, suppliers, advertisers, clients or customers for the remainder of their employment– all whilst remaining on the company payroll.

In not-so legalese terms, the employee serves a ‘notice period’ away from work and off the clock, with full pay. 

      

So, like PILON?

PILON is short for a payment in lieu of notice, ‘In lieu’ here meaning ‘instead of’. So instead of serving their notice period, an employee will get paid a lump sum at an amount equal to what they would have earned throughout their notice period. So if their contract states a notice period of 4 weeks, they will receive immediate compensation of a month’s pay upon termination. 

There is a key difference between garden leave and PILON – an employee who receives PILON is free to go straight into other employment. This is because they have been paid off in full and so are no longer technically an employee at that establishment – whereas someone on garden leave continues to be employed until the end of their notice period, and will be paid pro-rata (as a salary or wage stipulated in their contract).    

         

What does it look like in a contract?


If you’re not sure where or what to look for in a contract, Law Insider provides some sample clauses for garden leave. These should help you determine if your agreement has one, or, if you’re an employer, aid you in creating your own clause or policy for new employees. 

An employer looking to place an employee on a period of garden leave must have an express or non-compete clause (see garden leave clause example below) in the employment contract prior to it being signed.

     

Sample garden leave clause by Law Insider.
Sample garden leave clause Source: Law Insider

        

Without an express contractual clause, you may find that the employee’s right to work (as well as be paid) is upheld in court. 

         

Post-Termination Restrictions


Employers can use restrictive covenants or a non-compete clause (often abbreviated to ‘non-competes') for post-termination contractual obligations. The primary purpose of these covenants, similar to garden leave, is to protect inside information such as business contracts, key clients or suppliers, or otherwise confidential information.

What’s different about this type of clause is that they apply after termination. That means they can apply after garden leave to extend the protection of ‘legitimate business interests’ such as trade secrets being shared. The obvious benefit of this additional clause is that it’s at no cost.

One type of restrictive covenant, the non-compete clause, helps ensure that parting employees cannot begin working for a rival company or within a similar profession or trade that is in direct competition with their former place of work.

Garden leave and post-termination restrictions are not mutually exclusive and can be used together for maximum effect. But, in practice, it’s super important that they don’t go beyond what is reasonably necessary to protect ‘legitimate business interests’. Otherwise, you might find the clauses become unenforceable and may even have a breach of contract or employment rights.  

    


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How long does garden leave last? 


The duration of garden leave tends to reflect that of the notice period stated in your contract. Thus, garden leave can last anywhere from a week to three months and, in some cases, high-level executives will be expected to give a whole year’s notice.  During this time, the person on leave is still fully employed, meaning they get full pay and contractual benefits such as pension payments or medical plans. On the other hand, they are not permitted to begin new employment during this period, something this stockbroker had to learn the hard way.

     

What are the pros and cons of garden leave for both employers and employees?


Before going into anything, it’s best to have the full picture; the good and bad, for and against. 


The Pros

    

BENEFITS FOR EMPLOYERS

  • It can provide you with a helpful handover or transition period in which you can set accounts in order and find a new replacement. 

  • It may be more tolerable for the employee than an unpaid period of a restrictive covenant and they are less likely to challenge them. 

  • Since the employee would remain employed until they've fulfilled their notice, they’re still under contractual obligations. That includes keeping good faith and confidentiality as well as being available for any necessary business responsibilities.

  • If the employee is creating a negative working environment for you, your team or your clients, it is a good way to swiftly halt any negative impact they may be having on the efficiency or wellbeing of the organisation.

  • One reason employers opt for garden leave is that they know the employee will likely use what’s left of their working hours communicating with recruitment agents and prospective employers. Sometimes, it’s better to give them this time instead of receiving sub-par work as a result of their distraction or busier schedule.

  • Employee’s don’t always leave on good terms. They may choose to get lawyers involved or call for a tribunal. Garden leave ensures that the ‘drama’ stays between you and the employee, and doesn’t leak into other work endeavours or become ‘office gossip’.

          

BENEFITS FOR EMPLOYEES

  • Again, you will continue to receive all contractual benefits until your employment is terminated. These can also include the use of a company car and other equipment but that depends on the employer.

  • As an employee, employment law still protects you.

  • You have the extra time to start job hunting, contacting recruiters and to attend interviews which are usually held during working hours. 

  • You have the free time to upskill and focus on your personal or professional development (thereby boosting your resume). You could start that online course you’ve been meaning to do, or get the mandatory training for your new place of work completed and out the way.

             

The Cons

     

RISKS FOR EMPLOYERS

  • The obvious con here is the cost of keeping an employee on garden leave with no return of investment (i.e. with no contribution of work).

  • The other con is that a garden leave period isn’t always enforceable. Especially if they contradict or breach employment rights or their pay depends on the work itself, like commissions.

  • If the employee doesn’t comply, the employer either has to let the matter pass or seek a court injunction to sue the employee for damages, a lengthy and expensive process.

  • If the employee has individual responsibilities, skills, powers or client relationships, they will not be around to train or demonstrate how to execute those to the rest of the team in their absence or to the person replacing them.

    

RISKS FOR EMPLOYEES

  • If you get a new job offer, your current contract of employment would likely prevent you from taking on the new position until your current one ends (after garden leave), despite having the free time. 

  • Whilst for some, a month or two of garden leave is the perfect opportunity to kick back and get the well-earned rest they’d been dreaming of whilst on the job, for others, the prospect of having nothing to do on a Monday morning gives them the heebie-jeebies.

  • Whether you're a workaholic or a sleepaholic, having your time at work with the rest of the team, abruptly taken away can be intense. Often working through your notice period, gives you the time to adjust to leaving, an adjustment garden leave doesn’t reward.


    

Who is eligible for garden leave?


Companies typically reserve garden leave for executives or other high-level senior employees that handle confidential company information.

That’s not to say employers can’t use them for all employee contracts though. For example, if the company is small and works in a highly competitive niche industry with lots of confidential information at risk, having a garden leave clause would help protect highly valuable information. Think tech startups, information security firms, specialist types of journalism or those who work within politics. 

    

Garden leave FAQs - the short answers

    

The short answers 


You might have gotten to this point and thought “I’m all clued up”. Or, you may have skimmed over most of this, frown still intact. If so, here are some key questions and their answers in short, for those of you who hate nuance.


FAQs

Is garden leave a bad thing?

Not necessarily and not usually but it depends on the manner in which you’re leaving the job.

     

How long can garden leave last?

Between one week and one year. Usually, it is the length of the notice period stipulated in the employment contract. Yet, with exceptionally long notice periods, say more than six months, the employer may be unable to legally enforce garden leave for the full period, as it isn’t necessary to protect the legitimate interests of the employer.

    

Can I request garden leave?

You can request or suggest anything, but you’re only entitled to it if stated so in your contract.

     

Do I still accrue holiday pay?

Short answer: yes.

   
Is garden leave paid as a lump sum?

No, garden leave is paid as per your usual pay period. In most people’s cases, monthly. 

    

Is garden leave the same as a suspension?

No. A suspension happens in select cases, either due to medical/health and safety reasons or as part of a disciplinary procedure (investigation). A suspension can be paid or unpaid.

    

What is the difference between garden leave and furlough?

Staff are placed on furlough with the intention of them returning to work after their period of leave and may only get 80% of their salary (but can get paid fully) during that time. Staff on garden leave will not return to work after this period and will get paid in full.

     

What’s the difference between PILON and garden leave?

Short answer: Pay in lieu of notice is paid upfront as a lump sum and allows employees to move straight onto new employment instead of serving their notice period. Garden leave, by contrast, requires employees to serve their full notice period and whilst getting paid pro-rata as per their usual pay period.

     

Can I go on holiday in the garden leave period?

Yes, but you’ll need your employer’s consent.
      

How do I write a garden leave letter?

If you need to write a letter to an employee to notify them of garden leave, there’s a helpful template here.


     

Conclusion 


So hopefully you’re all up to speed on what garden leave is and everything that comes with it, including the potential advantages and drawbacks. You should know that garden leave is not the end of the world, in fact, it can be a positive thing - either way, you should now have more confidence and understanding of your options moving forward.

Nevertheless, not every situation is the same and it might look different to you depending on your circumstances. For that reason, it’s always important to get advice specific to your case.

      

     

Disclaimer:

This article is for informational purposes only; it should not be considered Financial or Legal Advice. Please consult a legal professional before making any significant financial or legal decisions.


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Post last updated on 04/01/2021