The Real Purpose of Garden Leave (And When to Use It)

When an employee gives notice, some businesses face a dilemma. The person who's leaving may know many sensitive details about the company and have strong relationships with clients. One way to protect your information is through garden leave, which keeps your employee on payroll yet away from work activities for a specified period. Let's explore what garden leave is and how it works in practice.

What is Garden Leave?

Garden leave is an employment practice in which a departing employee remains on payroll during their notice period but doesn't come to work. The employee remains technically employed and continues to receive regular salary and benefits. The only difference is that they won't have access to workplace systems and customers. The paid absence can last a few weeks to a few months. Garden leave is more common in the UK and Australia(opens in a new tab), but not unheard of in the US. It's sometimes called gardening leave, and it's usually kept for senior roles.

How Garden Leave Works

In many cases, garden leave starts when an employee resigns or receives a termination notice. Instead of working through the notice period, here's what usually happens during garden leave:

• Employment Continues: The departing employee stays on payroll with regular salary and contractual benefits.

• Access Ends: IT changes passwords and collects company devices.

• Obligations Remain: Contractual duties, such as confidentiality and non-solicitation, stay in force.

• Availability Required: Employers can ask for reasonable assistance with handovers or questions.

• Outside Work Restricted: Employees are usually not permitted to take other employment during garden leave.

Garden Leave vs. Notice Period: Key Differences

During regular notice, employees continue working and maintain normal access. Garden leave removes their work duties and access while preserving the employment relationship. Here's a side-by-side comparison:

Another Option: Payment in Lieu of Notice

Payment in lieu of notice (PILON) offers an alternative. With PILON, employment ends right away with a lump-sum payment. It offers a clean break and can prevent disruption at the workplace.

Legal Considerations of Garden Leave

Garden leave works differently depending on where you are. In the U.S., whether it's enforceable varies a lot by state. Massachusetts, for example, specifically covers garden leave in its Noncompetition Agreement Act(opens in a new tab). Here's what you need to keep in mind legally:

• You Need it in Writing: Garden leave clauses should be in your employment agreements upfront. It's different from a traditional non-compete agreement.

• Double Check State Rules: Massachusetts, for example, requires garden leave pay to be at least 50% of the employee's highest base salary(opens in a new tab) from the past two years.

• It Needs to be Reasonable: Courts may look at whether the length and restrictions actually protect legitimate business interests.

• Be Mindful of Restrictions: California and other states with strong anti-noncompete laws(opens in a new tab) may limit the effectiveness of garden leave.

Bottom line: It's a good idea to work with an employment lawyer to draft garden leave provisions that'll actually hold up. Generic templates that you can find online rarely account for state-specific requirements or how courts interpret things.

Pros and Cons of Garden Leave

Like anything, garden leave has its pros and cons. These apply to the employee who's leaving as well as your company. On the upside, garden leave can keep your company's information safe by stopping departing employees from immediately using what they know about your business. It also protects client relationships, giving you time to transition accounts and strengthen those connections. Employees may appreciate the paid transition, which gives them time to prepare for their next endeavor without having to stress about finances.

But there are some considerations to keep in mind. For one, it costs money. You're paying full salary and benefits without getting work done in return. It can't last forever since courts often reject really long garden leave periods. There's the necessity of managing it all, which requires careful documentation and process management. It can affect employee morale, and the departing employee may feel sidelined and restricted, since they usually cannot start a new job during this time.

When do Employers Use Garden Leave?

Small businesses often save garden leave for senior roles that may pose some competition risk. It's not really necessary for employees without access to sensitive information. Here are some common situations where you may want to consider garden leave:

• Senior executives who have strategic knowledge

• Sales leaders with strong client connections

• Technical roles that involve trade secrets

• Multiple employees leaving at the same time (group exits)

Making Smart Decisions for Your Business With Justworks

Depending on your location and the implementation, garden leave can be a valuable tool. It can protect your business and support a controlled transition when employees leave sensitive roles. Using the right technology can make the process easier. Our modern HR tools streamline offboarding workflows, from system access removal to final payments. Simplify your HR tasks and receive the compliance support you need. Get started with Justworks today.