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What is “Garden Leave?”

On Behalf of | Sep 7, 2023 | Business Disputes

“Garden leave” is a clause in an employment contract that requires an employee to serve out their notice period after they’ve resigned away from the workplace – basically doing their gardening or whatever else they want to do. During this time, the employee continues to receive their full salary and benefits, including healthcare, retirement contributions and other perks – but they’re not free to work elsewhere until the notice period is up.

Garden leave wasn’t invented in the United States, but it’s gained a lot of traction here in recent years, with several states already passing rules both for and against it. It comes up most often in contracts with high-level executives and employees who have access to time-sensitive company information.

What are the pros and cons of garden leave?

One of the most significant advantages of garden leave is that it provides financial security for the departing employee. 

With a garden leave clause in place, they know exactly how long they will keep their current salary and benefits if they resign, which can make it easier for them to make the transition to another position elsewhere. This can be particularly beneficial for executives or employees with specialized skills, who may require more time to find the right position.

For employers, garden leave reduces the risk of intellectual property theft, data breaches and other security concerns. In industries where client relationships are everything, garden leave can prevent departing employees from immediately joining competitors and “poaching” clients away.

However, garden leave isn’t always a great thing. It can potentially delay someone’s career progression and income growth, and even a small gap in work activity can cause someone with highly specific industry-related skills and knowledge to fall out of touch with current trends, which can negatively affect their marketability.

For employers, too, garden leave has some drawbacks. Not only is the employee on garden leave a drain on the company’s financial resources, the optics of “paying someone a lot to do nothing” can be damaging.

Ultimately, the decision to use garden leave in a contract should be made thoughtfully and with a clear understanding of its implications for all parties involved. Legal guidance can help both companies and individuals determine what options best meet their goals and how to negotiate an agreement that’s fair and enforceable.