Maurice Blackburn

"Garden leave" or "Gardening leave" is the practice of directing an employee to not attend work during the notice period after they resign or their employment is terminated due to dismissal or redundancy.

Employees are well advised to seek legal advice on the validity of their garden leave clause.  An employee in breach of his employment contract was recently ordered to pay more than $500,000 to his employer (Purcell v Tullett Prebon (Aust) Pty Ltd [2010] NSWCA 150)

An employee on garden leave may be directed to stay home on full pay, to refrain from contacting clients, and to refrain from accessing the employer's confidential information.

Whilst on garden leave an employee may lose the opportunity to maintain the benefits that come from gainful employment such as maintaining their skills and reputation, keeping current with the latest information in the industry, as well as transitioning into new employment while they still have networks and contacts in their relevant field.

An employee on garden leave must comply with lawful and reasonable directions from their employer and are bound by the implied duty of good faith and fidelity to their employer.  This duty precludes an employee on garden leave from soliciting clients and employees of their employer as well as working for a competitor during the notice period.

Garden leave scenarios fall into two categories;

1. Garden leave is not mentioned in the contract of employment.
2. The contract of employment specifically provides for a right of the employer to put the employee on garden leave.

Garden leave not mentioned in the employment contract

Attempting to put an employee on garden leave during their notice period without an express right to do so, may be a breach of employment contract.  If an employee disputes a direction to go on gardening leave, a court will need to determine whether there is an obligation on the employer to provide meaningful work to the employee.  There are certain categories of employment where an obligation to provide work will be readily implied, they include;

1. Roles where publicity and exposure to the public is important;
2. Employees employed for a specific project;
3. Specific or unique positions;
4. Where the skills required for the position require frequent exercise in order to enhance and preserve them;
5. Where the remuneration received is dependant on performance of duties (e.g. commission structures)

If the employment does not fall within the above categories then a Court will look at the construction of the contract of employment and the surrounding circumstances to determine whether there is a duty to provide work.

Case of BearingPoint Australia Pty Ltd v Hilliard [2008] VSC 115

Garden leave clause in contract

If an employee's contract of employment expressly permits for an employer to put the employee on garden leave the Court will need to determine if the clause is an unreasonable restraint of trade.  Courts will only uphold a restraint of trade clause of it only extends as far as is necessary to protect the employers legitimate business interests such as protecting customer connections, confidential information and maintaining a stable workforce.  In determining whether a restraint is reasonable to protect the legitimate business interests of an employer the Court will consider;

1. The scope of the restraint including the length and geographical area.
2. Whether the restraint is confined to a particular industry or business that the employer operates or is broader
3. Whether the restraint is limited all of the employers clients or just clients the employee has dealt with
4. Whether the restraint would prevent the employee from "plying their trade" and/or "earning a living."
5. The nature of the employers business and its relationship with its clients;
6. The bargaining position of the parties when entering into the contract and whether the employee had an opportunity to seek legal advice;
7. The position of the employee in the business including the seniority of the position and the amount of contact with clients;
8. Amounts paid to the employee has received in consideration for the restraint;
9. How long it would take the employer to train another employee to put them in the comparable position to the employee that is leaving in terms of familiarity and connection with clients.
10. The type of restraint; ie restraint on soliciting clients, restraint on use of confidential information, restraint on solicitation of employees of the employer.

If a court finds that the garden leave clause is unreasonable then the court is likely to strike out the restraint.  However in limited circumstances a court may sever an unreasonable part of a restraint by drawing a line through the offending parts of the clause but only if the clause remains intelligible.  This has lead to employers using "step" or "cascading clauses" that allow the court to sever sections of the clause and leave the parts that the court finds reasonable.

Due to the complexity of the law in this area and the subjective nature of the judgements that need to be made determining the validity of a garden leave clause can be very difficult.

If you have been put on "garden leave" or you would like advice on a post employment restraint in your contract of employment you should seek legal advice about your situation from Maurice Blackburn Employment Lawyers on 1800 810 856.