Drinking a cup of coffee on the front lawn. A lunch hour spent working in the garden. Then an afternoon working on a laptop in an Adirondack chair, a dog napping in the grass. Weather-dependent, that all seems like a perfect remote workday.
Or, it might be a picture of an outgoing employee on garden leave.
When an employee is placed on garden leave, they've either already given their resignation or received a notice of termination by their employer.
But rather than working through their scheduled end date, they’re asked to stay home during their last few weeks (or months) — while still receiving their full pay and any contractual benefits.
Essentially, they're paid to "tend their garden."
The practice ensures a departing employee — especially one with access to sensitive data — can't immediately jump to a competitor and use that knowledge against their former employer. That is, it helps companies protect their confidential information and preserve their business interests and client relationships.
As non-compete agreements face growing legal challenges around the world, garden leave is increasingly viewed as a viable alternative. If you're considering using it, be sure the process fully complies with local employment laws.
Key takeaways:
- Paying an outgoing employee to stay home can protect your company from immediate competition and the loss of confidential information.
- A garden leave period can ensure a smooth transition of responsibilities and prevent an unscrupulous outgoing worker from negatively impacting colleagues or projects.
- To ensure a legally compliant process, employers should detail the specifics of the leave in employment contracts.
What Is Garden Leave?
The purpose of garden leave is to prevent senior employees or executives from immediately joining a competitor’s team and using their knowledge to the detriment of their former company. Making it harder for AI talent at Google, say, to accept an outsized offer at Meta.
During the leave period, the employee is still technically employed and continues to receive their salary and benefits. However, during that time, they are not expected to perform their job. Instead, they may travel, sleep late, or, as the term suggests, work in their garden.
It’s a practice common in countries with strong employee protections, such as the U.K., Australia, and Germany. But it’s becoming common in the U.S., too.
In 2018, Massachusetts passed a law that codified garden leave for certain non-competition agreements, among other provisions. The law requires employers to pay at least 50% of the employee's base salary during any non-compete period.
When and Why Employers Use Garden Leave
Whether an employee resigns or is terminated, garden leave can be used to protect their employer's interests during a transition period. Key reasons to implement this type of leave include:
- Protecting confidential information: The leave period helps prevent employees with access to sensitive data, trade secrets, or proprietary information from sharing it with a competitor.
- Preventing immediate competition: The practice acts as a buffer, preventing departing employees from immediately joining a rival company.
- Maintaining business continuity: Garden leave supports the smooth transition of responsibilities while minimizing the potential for clients feeling unsupported or worried by an employee’s absence.
- Avoiding workplace disruption: In cases where an employee's departure is combative or on less than amicable terms, the leave removes the risk of them negatively influencing colleagues, damaging morale, or even intentionally sabotaging company projects during their notice period.
- Enforcing legal provisions: Garden leave can be a way for a company to enforce restrictive covenants like non-compete or non-solicitation clauses. By continuing to pay the employee, the company may make these provisions more legally defensible than if the employee were unpaid.
How Does Garden Leave Work?
A key aspect of this strategy is that an employee on garden leave is prohibited from working for another company or starting their own business.
Specific terms, however, should be defined in an employment contract. Restrictions can range from a prohibition on any professional networking to a more flexible grace period that allows the employee to actively search and interview for a new job.
In some cases, leave provisions act as a form of a non-compete clause, including restrictions on the types of roles or industries the employee can pursue in the future.
The contract may also require the employee to be available to answer questions or provide assistance to ensure a smooth transition of their duties.
While most commonly associated with employees leaving the company, garden leave can also be temporary, say, during an internal investigation, a corporate restructuring, or anytime a company wants to maintain an employment relationship while restricting an individual’s access to the workplace.
Employment Contracts Should Contain Garden Leave Provisions
The best way to ensure things go smoothly is by creating clear policies, spelling them out in an employment contract, and applying them uniformly for people in similar roles. A garden leave policy should outline:
- Terms of the leave, including duration, pay, if the employee is required to take any accrued time off before leave pay kicks in, benefits, etc.
- Any restrictions on working for a competitor, contacting former clients, etc.
- Protections for the company’s intellectual property
If you don't initially include a leave clause in an employment contract and try to impose one afterward, it could open your company to lawsuits. So, if you think you need one, it’s better to do so up front.
Your in-house counsel — or an Employer or Record (EOR) service — can help ensure all the legalities of your garden leave policy are properly tended.
An Employer of Record Can Ensure Garden Leave Compliance
There’s a lot to keep track of when managing remote employees. However, managing an employee on garden leave isn’t simply an out-of-sight, out-of-mind scenario.
That’s when an EOR service can be a boon for managing the unique circumstances of garden leave. As the legal employer, the EOR ensures that employment contracts comply with local laws and include enforceable leave provisions.
Moreover, the EOR handles all the administrative and legal aspects, ensuring the continuation of the employee's pay and benefits throughout the leave period. Then, they can manage the entire offboarding process, from ensuring nondisclosure agreements are properly drafted and signed to communicating all the ins and outs of the leave with the outgoing employee.
From start to finish, an EOR can guarantee that an employee’s leave is handled in full compliance with all relevant local labor laws and regulations, minimizing the risk of legal challenges for the employer.
Compliantly Onboard (& Offboard) With RemoFirst
As an EOR, RemoFirst helps companies hire and manage a global workforce in over 185 countries. By partnering with RemoFirst, businesses can expand their teams internationally without the expense of setting up local legal entities.
Our services ensure that all aspects of international employment are handled in full compliance with local laws. This includes creating well-documented employment contracts incorporating provisions like garden leave and intellectual property protections to safeguard your company's interests.
We also manage the entire employee lifecycle and streamline everything from remote payroll management and the complexities of paying international contractors to designing the right benefits package for your global team.
Ready to see how RemoFirst can simplify your international employee management? Schedule a demo today to learn more.
