What is Garden Leave
This term is used to describe an employee who has been dismissed and hence is not required to work, nevertheless is still receiving his or her normal salary whilst staying at home. Hence the employee has been suspended on his work and duties but not on his pay. This is a type of restrictive covenant.
When does it occur
This approach is taken by the employer in order to protect their company. This usually occurs when an employee hands in his or her resignation letter to their employer in order to work for the company’s competitors. Therefore in such a situation certain restrictions are passed by the employer on the employee. These restrictions are put in the contract of employment and it is the duty of the employee to obey those restrictions. However theses restrictions cease after the termination of the employment contract.
Why impose such restrictions
The reason why employers put such restrictions in the contract of employment is because the employee may possess such knowledge and information about the company which the employee may use for the benefit of their competitor company. Hence such restrictions will prevent the employee to use or give out any trade secrets or confidential information such as product pricing or manufacturing secrets which may harm the employer and benefit the competitor company.
When can it enforced
Restrictive covenant can only be enforced if the restrictions are no wider than necessary to protect the employer’s legitimate business interests. It cannot be used to restrict or avoid competition as this would be unreasonable restraint of trade. Moreover it should be noted that the law does not permit the employer to enforce any restrictive covenant if the employee ended the contract of employment because of repudiatory breach by the employer or in a situation where the employer unfairly dismisses the employee.
How can it be enforced
An employer who would like to impose restrictive covenant, may impose such restrictions through obtaining an interim injunction. However, if interim injunction cannot be obtained, the employer may insert restrictive covenant in the employee’s contract of employment and thus seek damages if the employee breaches any of the restrictive covenants.
Four types of Restrictive Covenant
There are four types of restrictive covenant. These are non-compete covenant which seeks to prevent the employee to work with a competitor or compete with the employer, this is usually for a set period of time and a set geographical area; non-solicitation/non dealing covenant which seeks to prevent an employee form relationship with the employer’s customers till a set period of time; non-poaching of employees which seeks to restrict the employee to employ any of his or her colleague or workers of the employer; and restrictions on the use of confidential information learned by the employee during employment.
What rights does the Court permits to protect
The Court permits the employer to protect and enforce restrictions on their trade connection, trade secrets and other confidential information. Nevertheless it should be noted that the employer should distinguish between the employee’s personal connections to trade connections. However where the trade secrets and other confidential information is concerned, it is uncertain how confidential a piece of information needs to be before it could be classified as trade secret or confidential information. But as a general thumb of a rule, the Court has stated that if the information is well known and not a secret to the world or its disclosure is unlikely to harm the employer in any way, it is very much likely that it would not form the basis of restrictive covenant. Therefore the trade secret or any other confidential information should constitute a proprietary interest in order to be protected.