Garden leave: Overview, definition, and example
What is garden leave?
Garden leave refers to a period of time when an employee who has resigned or been terminated remains away from work but continues to receive their regular salary and benefits. During this time, the employee is not required to perform any work duties, and their employer typically asks them to refrain from engaging in any activities that could harm the company, such as joining a competitor. The term "garden leave" originates from the practice of employees being asked to stay at home and tend to their gardens while still being paid, though it is now used more broadly.
In simpler terms, garden leave is when an employee is on paid leave after leaving their job, without working or attending the office, often to prevent them from taking immediate action with a competing company or organization.
Why is garden leave important?
Garden leave is important because it protects both the employer and the employee during the transition period following resignation or termination. For employers, it helps to prevent employees from taking sensitive company information or intellectual property to a competitor, or from causing disruption by starting a new job right away. For employees, it provides time to plan their next move while still receiving compensation. It can also help maintain a positive relationship between the employee and employer, as the employee is still paid and treated professionally.
For SMB owners, offering or enforcing garden leave can be a strategic move to ensure business continuity and protect company interests when key employees leave the organization.
Understanding garden leave through an example
Imagine you’re the owner of a marketing agency, and one of your senior employees has given notice that they are leaving to join a competitor. To prevent them from taking any sensitive client information or harming your business in the meantime, you place them on garden leave for the remaining two months of their notice period. During this time, they are still paid their regular salary but are not allowed to work for your company or take on any new projects. This ensures they have time to transition without immediately joining a competitor and causing any harm to your agency.
In another example, an employee in a senior management role at a tech firm resigns to join a rival company. The employer places them on garden leave for the final three months of their contract. During this period, the employee remains at home, receiving their regular pay, while the company ensures they don't start any work for the competitor during the leave period.
Example of a garden leave clause
Here’s how a garden leave clause might look in an employment contract:
“The Employee agrees that upon resignation or termination of employment, the Employer may place the Employee on garden leave for a period of [insert duration] months. During this period, the Employee will continue to receive their regular salary and benefits, but shall not be required to perform any work for the Employer or engage in any employment or business activities that conflict with the interests of the Employer. The Employee agrees to remain available to the Employer during the garden leave period for reasonable consultation, if required.”
Conclusion
Garden leave is a valuable tool for both employers and employees in managing transitions. For employers, it offers a way to protect business interests, prevent competitors from gaining access to valuable employee knowledge, and ensure smooth transitions when key employees leave. For employees, it offers the financial security of continued salary and benefits while allowing time to plan for their next career step.
For SMB owners, understanding and implementing garden leave clauses can be a smart strategy to ensure a positive and secure departure for key employees, while also safeguarding the company's interests during the transition.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.