Sunday, January 24, 2010

Why Use Garden Leave?

No, garden leave do think of garden leave as a panacea for all problems of departing employees. I can easily see that a departing employee (and/or their new company) may find the costs of litigation and the money paid during the garden leave outweighed by the profits of jumping ship. (One may also want to read BEAR, STEARNS & CO., INC. v. Sharon, 550 F. Supp. 2d 174 (D. Massachusetts 2008) for an example of a gardening clause not being upheld).

Hong Kong's Career Times gets to the nitty-gritty in Garden leave:

Q1 Why are employers keen to impose garden leave on employees?
A1 Placing an employee who intends to join a competitor on garden leave has several advantages for the employer:
- By temporarily delaying his arrival at the competitor, existing business relationships can be secured;
- The "shelf life" of current confidential information known to the employee will be reduced;
- The employee is not allowed to compete with the employer during his garden leave.
Better off thinking of garden leave as a tool for specific types of employment. I cannot see how it will work in the purely commission types of employment.

I see garden leave working as a very good substitute to non-competition agreements in certain areas. Such as the medical field where non-compete agreements are not exactly favored by the courts (see Enforcement of noncompete agreements).

On the other hand, consider these points from Garden leave a viable option once more as providing a counter-argument to this idea:
The majority went back to first principles and noted that an employer who is paying an employee appropriately is obliged to provide an employee with meaningful work only in limited circumstances - such as where the employee has a specific or unique skill, and where it is clear that the employee's future employment depends on maintaining this skill. Good examples are employees in the entertainment and sporting industries, such as television producers and professional footballers, where garden leave may blunt their skills.


The good news for employers is that a failure to provide work will not automatically give rise to a breach of contract claim - even if the parties do not include a term in the contract that garden leave is legitimate. As a matter of practice, and to ensure the employee cannot argue they fall within a special skill category, employers should continue to include clauses in employment contracts which allow them to:

# make a payment in lieu of notice; or

# require the employee to take garden leave.
Much depends on the actual terms of the agreement, of course.