In some situations when an employee is ending employment, you can agree to pay them to stay at home during the notice period instead of having them come to work. This is commonly called “gardening leave” (or “garden leave” or “leave in lieu of notice”).
This means they’re still an employee and will be paid in full for the duration of the notice period, but they aren’t required to attend work.
Gardening leave gets its name in reference to the employee staying home to tend the garden (or whatever other pastime they enjoy) rather than coming to work.
What is gardening leave?
Gardening leave is not a term defined in the Fair Work Act, but is a contractual arrangement between an employer and employee that the employee won’t come to work during the notice period while they remain employed and receive full pay and entitlements.
Gardening leave is commonly used in Australia in situations where it’s better for the employee not to attend work or have contact with clients or other employees while they observe their notice period (for either all or some of it).
Gardening leave differs from other similar situations, such as:
- Payment in lieu of notice (when you pay an employee not to work the notice period but the employment relationship ends immediately).
- Suspension (when the employee does not attend work for a serious reason, e.g. you are investigating an allegation of severe misconduct or the person poses a health and safety risk to themselves or others).
- Temporary shutdowns (when you temporarily shut all or part of the business and require employees to take annual leave, e.g. during the Christmas period).
When is gardening leave useful?
Gardening leave is used during the notice period, especially in instances of:
- An employee resigning to work for a competitor and they have access to commercially sensitive information you want to protect (they may be covered by a post-employment non-competition or non-solicitation clause).
- Dismissal that has come as the consequence of a series of disciplinary actions - when it’s better for both parties not to be in the same space.
- Employee redundancy - this gives the employee the opportunity to start looking for another job while they’re still employed.
- The employee resigns and there are relationship issues at work, the employee is a distraction, or doesn’t want to attend work for professional or personal reasons.
When you shouldn’t use gardening leave
You can put an employee on gardening leave if there is a clear provision for it in their employment contract, which they have agreed to at the beginning of employment, or later on through a contract variation.
There is legal precedent that in certain circumstances, there can be an implied (rather than explicit) term about gardening leave in an employee’s contract but we don’t recommend relying on this. If the employee has a position that could give them access to the organisation’s confidential information, you should include a gardening leave provision in the contract.
Employee rights and employer obligations during gardening leave
It’s important to remember that during gardening leave, both parties are still in an employment relationship and all employment rights and obligations must be adhered to.
Employee rights during garden leave
- Continuation of employment status.
- Entitlement to full pay, superannuation, and benefits, including final payment at the end of the notice period.
- Accrual of leave, e.g. annual leave, public holidays, leave loadings.
- Fair and reasonable treatment.
Employer obligations during garden leave
- Continue paying the employee’s salary/wages.
- Follow the terms of the employment contract.
- Honour all benefits and leave entitlements, this includes the continued use of any company equipment that is part of their package, e.g. vehicle, laptop.
Employee obligations during gardening leave
- Act in good faith and remain loyal to their employer (i.e. not act in a way that is contrary to the company’s interests).
- Respect company policies, e.g. confidentiality and leave policies.
- Be available for handover (if required) or any other reasonable request.
What can employees do while they’re on gardening leave?
As the name implies, when an employee is on gardening leave, they aren’t usually required to perform their normal role. However, they should be contactable during normal work hours.
You could have the person perform alternative duties instead of their usual role. We often see employers ask employees to finish handover notes, tidy up files or complete administrative work. The duties should be reasonable, within the scope of the employment contract, and not demeaning. The employee remains on full pay, so the purpose of alternative duties is to keep them productively engaged while limiting their access to clients, colleagues or sensitive business information.
As the person is still employed, they can’t go off and start working for another employer, but you could let them start job hunting.
Whatever you ask the employee to do (or not do) during garden leave, it’s best to put it in writing so there’s no confusion.
Risks to employers when putting employees on garden leave
Gardening leave is not a way to punish an employee or get around providing them with their employment minimum rights.
If you are found to have misused gardening leave or the clause in the employment contract isn’t valid, you could open the business up to legal action, such as breach of contract or unlawful termination claims.
Employers have found themselves on the wrong side of rulings when they don’t provide the employee with all their rights and entitlements, including their full remuneration package (which might include a vehicle or other company assets, allowances, bonuses etc).
Other common mistakes include:
- Failing to clearly explain the expectations, duties, or restrictions during the garden leave period.
- Assigning work that is outside the scope of the employee’s contractual role, or is demeaning or inconsistent with the agreement.
- Restricting access to information beyond what is reasonable or necessary.
Also be aware that under your duty to provide employees with work, there may be circumstances where you have to provide compensation to a worker who is taking gardening leave, either because:
- Their remuneration depends on commission from sales, e.g. a salesperson, account manager.
- Ongoing employment is required to maintain their skills, e.g. surgeons, athletes.
- Ongoing employment is required to maintain their public reputation, e.g. entertainers, presenters.
We recommend you seek legal advice before adding garden leave provisions to your employment contracts or before putting an employee on garden leave if there is any disagreement.
Alternatives to gardening leave
You can choose to pay the employee in lieu of notice, so long as there is a provision for it in the employment contract or the employee agrees to it. This means employment finishes on an agreed date and the employee doesn’t work all or some of the notice period. You must pay them the full amount they would have received if they had worked until the end of the notice period, as well as their full final payment.
Alternatively, you can agree to waive the notice period and the employee would not be paid in lieu.
You could also allow the employee to use some of their annual leave during the notice period, e.g. if they want to take a short holiday before looking for a new job.
Can employees refuse to go on gardening leave?
There may be (rare) occasions when an employee doesn’t want to go on gardening leave. They may want to finish off some important work, are concerned about how being placed on garden leave will appear to others, or don’t want to stay bound to their employment contract during the notice period.
If there is a gardening leave provision in their employment contract, the employee has already agreed that you can direct them to stay at home. But if there isn’t, you should be careful to weigh your options about forcing them to not work if they don’t agree. It could open you up to legal challenges.
We recommend keeping lines of communication open. Give them some time to think about the situation. If they want to finish a piece of work, explore options for doing so from home or finding mutually agreeable alternative duties. You could also reassure them that being placed on gardening leave will remain confidential.
You could also consider paying them in lieu of notice rather than having them on garden leave. The benefit of this approach is that it provides a clean and immediate break. The potential risk is that you lose the ability to restrict their activities during the notice period, meaning they can immediately begin working for another employer.
Gardening leave and restraint of trade clauses
A restraint of trade clause (whether it’s a non-compete or a non-solicitation restraint) only takes effect after an employee’s employment ends, while gardening leave provisions take effect once the employer or employee has given notice of termination, but the employee remains employed.
Putting an employee who is covered by a restraint of trade on gardening leave can help protect your business interests for a longer period, but you need to ensure this is fair and legal.
Adding gardening leave provisions to your employment contracts and how MyHR can help
Gardening leave provisions aren’t mandatory in employment contracts but including them ensures you can lawfully direct an employee to take garden leave, if you need to.
If you need any help drafting clear, robust employment contracts, get in touch with MyHR. Our on-call HR team are experts at tailoring employment documentation for your business’ specific requirements, all delivered ready for digital signatures through our powerful HR platform.
