DAVID ROYDEN - EMPLOYMENT SOLICITOR
UK EMPLOYMENT LAW

David Royden is a Partner with Laytons Solicitors and Head of Employment Law, Manchester, UK

Laytons Solicitors is a national law practice specialising in all aspects of Company and Commercial Law

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GARDEN LEAVE

“Garden leave” is the term given to a situation whereby an employee is required to serve out a period of notice at home (or “in the garden”). During this period the employee continues to receive all salary and benefits but is prohibited from commencing employment with new employers until the gardening leave period has expired. It is a practice which employers often adopt with employees who have a certain status whereby they have access to confidential information or customers and where they are leaving to join a competitor. During the gardening leave period the employee’s access to such information or customers is either restricted or denied.

Case Law

Employers used to assume, albeit that there was always a danger in doing so, that they could enforce gardening leave even in the absence of an express “garden leave” clause in the contract of employment. The danger of this assumption was highlighted in William Hill Organisation Ltd -v- Tucker 1998 where the Court of Appeal refused to grant an injunction where the contract of employment contained no garden leave clause and no clause entitling the employer not to provide work. Whilst the Court of Appeal rejected the argument that there is a general implied obligation to provide work under a contract of employment, the Court accepted that in certain circumstances, where the employee’s duties are specific or unique and the skills required to discharge those duties require frequent exercise, the employer’s obligation under the contract of employment may, in addition to payment of the agreed remuneration, extend to an obligation to provide work.

In Symbian Ltd –v- Christensen 2001 the Court of Appeal upheld the decision in Tucker (above) and stated that even a clear garden leave clause will only be enforced to the extent that it is reasonable so that such a clause is in fact subject to similar rules as restraint of trade clauses.

In Clark v Nomura International plc 2000 the employee was dismissed by three months’ notice on garden leave. The dismissal itself was not wrongful, but during the notice the date occurred for the employee’s annual bonus. Unlike previous occasions his employers awarded him nothing even though his trading had continued to be profitable during the garden leave period. The judge held that the employers were in breach of contract, quantified the bonus that would normally have been paid at £1.35 million, and awarded that.

Contractual Provisions

For an employer to be able to rely on the ability to place an employee on garden leave the contract of employment should include, as a minimum, a provision that the employer is under no obligation to provide work to an employee. This provision should be stated to apply throughout the duration of employment, not just when notice to terminate has been given. However, from an employer’s perspective it is far more preferable for the contract of employment to have in addition a separate and express garden leave clause which should include the following terms applicable during the garden leave period:

  • a provision that the employer is relieved from any obligation to provide the employee with work;
  • a right to exclude the employee from the work place;
  • a prohibition on contact with customers and/or clients;
  • a prohibition on the employee from undertaking any other employment during the garden leave period;
  • an indication of how the loss of any entitlement to bonus or right to earn commission will be compensated for to avoid any potential claims of constructive dismissal.

In the absence of any one of the above employees may not necessarily be restricted from the activities they may undertake whilst still technically employed by their employers.

Finally, at the time of termination, if there is any exchange of letters between the employer and the employee, it would appear that the employer will need to expressly state that the garden leave provisions will be relied upon. Otherwise, as in the case of Hutchings -v- Coinseed Limited 1998, an exchange of letters may have the effect of varying and even overruling the terms of an express garden leave clause with the result, in that particular case, that Ms Hutchings was able to take up work and indeed be paid for working for a competitor whilst also able to recover a notice payment from her existing employers!

Conclusion

To rely on such clauses employers need to ensure that they have appropriately drafted clauses in their contracts of employment and that they exercise their right to place employees on garden leave carefully. Failing this, employees need not assume that, by merely being placed on garden leave, they are prevented from doing anything and should seek legal advice as to their rights and obligations during this garden leave period.

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