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When to use “Garden Leave”

One of the most frequent questions we are asked on our advice line is “How do I handle resignations?” Well, you have three options when an employee resigns (or is dismissed).

The first is to make them work their notice. Often, if the move is amicable, this works well. They part on good terms and you have time to prepare.

The other options require the notice clause in the employment contract to include specific points. “Pay in lieu of notice” is when the employer feels it is best to accept a resignation with immediate effect or, having followed the correct process, dismisses the employee that day. The employee is paid their contractual notice – subject to normal payroll deductions – and employment stops immediately.

The third option causes most confusion: Garden leave. The term originated in the British Civil Service where employees could request special leave for exceptional purposes. “Garden leave” became a euphemism for “suspended”: as an employee formally suspended pending an investigation would often request to be away on special leave instead. Employees receive normal pay during garden leave and must adhere to their conditions of employment. Nowadays if an employee is suspended they can be called in for interview to quicken the process. Suspension though should only be used for serious cases – like fraud or bullying – where the business or others may be at risk. However, when key personnel resign, particularly to join a competitor, the employer may want to use the garden leave provision in their contract. This requires the employee to stay away from the workplace and do nothing. They are paid salary and benefits and accrue holiday. They may not work for anyone else and do not have access to company data or other assets. After the garden leave any further protection like a restrictive covenant would be in place, but if contested the courts usually deduct the time spent on garden leave.

For a free contract review to ensure you have these options or to discuss restrictive covenant protection contact The HR Dept.