What is garden leave, why is it so important, and can furlough have a similar effect?
Garden leave is the practice of placing restrictions on an employee during their notice period usually by preventing them from attending the workplace, accessing work systems or having contact with clients or colleagues.
Why is garden leave necessary?
From an employer's point of view, a clause in an employment contract allowing the employer to put an employee with a certain level of influence or access to information on garden leave is most necessary and useful.
The aim of garden leave is to keep the employee sufficiently out of the marketplace during the notice period (provided notice is long enough) for any sensitive commercial information that they have to go out of date, or for the employee's successor to establish themselves, particularly with customers, so as to protect the business.
In most cases, this can only be achieved if there is an express garden leave clause in the employee's contract. This enables the employer to vary or withdraw their duties altogether during the notice period and to keep the employee away from work systems, colleagues and clients whilst not being in breach of contract.
Having an express garden leave clause may help deter a competitor from poaching employees in the first place and increase the employer's bargaining position. Such a clause may also be used in conjunction with post-termination restrictive covenants for maximum effect.
Effect on other parts of the employment contract
Garden leave is often used with restrictive covenants to protect an employer's goodwill, confidential information, business connections and the stability of its workforce.
Without a garden leave clause, employers could be in breach of contract in keeping the employee away from work, losing the protection of restrictive covenant clauses to prevent or restrict the employee from having any undue advantage with a competitor.
To make them more likely to be enforceable, it is common practice that the total duration of a restrictive covenant should be reduced by the amount of time an employee spends on garden leave.
During garden leave, the employment contract continues and so employers must continue to perform all the terms of the contract, including paying salary and other contractual benefits (unless expressly excluded) and allowing (or asking) employees to take holiday.
Employees must also continue to abide by all their contractual obligations during the entire garden leave period, except (in most cases) the obligation to carry out work for their employer. This includes not working for any other business, maintaining the duty of loyalty towards the employer and not using or divulging any of the employer's confidential information.
One question that will become increasingly relevant is whether restrictive covenants are affected if an employee has been placed on furlough instead of garden leave. If an individual is placed on furlough, their access to customers, clients and colleagues could be restricted for that period, as fully furloughed individuals should not be carrying out any work (but may still have access to work systems).
This may impact some terms of the restrictive covenants, particularly those that rely on the employee having contact with those clients and customers prior to their termination of employment.
However, whether furlough could be viewed as the same as garden leave in reducing the length of restrictive covenants is to be doubted. It is not something that has been specifically addressed by case law or government guidance to date so it is always advisable to seek legal advice, particularly when relying on post-termination restrictions for those who have been on furlough.