Garden leave in redundancy

What is garden leave?

Garden (or ‘gardening’) leave is the term typically used to describe an employee who has been dismissed or is at risk of redundancy and is not required in work. However, they are still receiving their usual salary and benefits whilst on garden leave, but are not allowed contact with other employees or customers; and will usually be denied access to company computer networks, mobile devices, etc.

However, the courts have recognised the employee’s ‘right to work’, so unless there are express provisions in their employment contract allowing the employer to impose garden leave should the circumstances arise, the employee may have a case for breach of contract against the employer. Your employer cannot force you to go on garden leave without express contractual provisions.

When does it occur?

Garden leave is an approach often taken by the employer in order to protect their company from potential problems in relation to the employee, for instance, because of restrictions within the employment contract. In addition, it is understandable why an employer may not want an ‘at risk’ employee to be working alongside those who are not at risk: relationships could understandably be strained.

Employers also frequently rely on garden leave if they are concerned about such post-termination restrictions, for instance, restricting the employee from soliciting customers, working within a 5-mile radius, or giving out trade secrets or confidential information such as product pricing or manufacturing secrets which may harm the employer and benefit a competitor company.

Why does garden leave help the employer?

Garden leave protects the company from action by a possibly disgruntled employee that could harm the employer. Although the employee will not be ‘at work’, they will still be employed and will continue to be paid and are therefore still bound by their employment contract.

This means if the employee breaches a restrictive covenant in the employment contract, the employer may be able to take action against them.

What types of restrictive covenant are commonly used?

There are four types of restrictive covenant:

  • non-compete covenants preventing the employee working with a competitor or from competing with the employer (usually for a set period of time and within a set geographical area);
  • non-solicitation/non-dealing covenants seeking to prevent an employee from forming a relationship with the employer’s customers for a set period of time;
  • non-poaching of employees restricting the employee from employing former colleagues or workers of the employer; and
  • restrictions on the use of confidential information obtained by the employee during employment.

When can such restrictive covenants be enforced?

Restrictive covenants can only be enforced if the restrictions are no wider than necessary to protect the employer’s legitimate business interests. They cannot be used to restrict or avoid competition as this would be unreasonable restraint of trade. Moreover, the law does not allow the employer to enforce any restrictive covenant if the employer unfairly dismisses the employee, (or the employee ended the contract of employment because of repudiatory breach by the employer).

How can a restrictive covenant be enforced?

An employer can enforce such restrictions by obtaining an interim injunction from the court. They can also seek damages for breach of restrictive covenant if losses have been suffered as result.

To what extent the courts allow these restrictive covenants depends, in part, on the industry/sector, and other relevant factors. For instance, a distinction is made between the employee’s personal connections to trade connections.

However, where 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 a trade secret or confidential information. As a general rule of thumb, 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 likely that it would not form a valid basis for a restrictive covenant. Therefore, the trade secret or any other confidential information should constitute a proprietary interest in order for it to be protected by way of a restrictive covenant.