Everything HR Needs to Know About Using Garden Leave

Imagine this: You're paying an employee to spend their days lounging by their backyard pool. They’re not on vacation, but they’re free from work duties — and still on your payroll. 

Welcome to garden leave, a unique approach some companies take when an employee decides to part ways with them.

At first glance, this may sound incredibly wasteful. Why would you pay a clearly unproductive employee?

But garden leave is not about giving someone an extended vacation. It’s as a strategic move to protect sensitive information, maintain workplace morale, and shield the company from potential loss. 

Let’s dive into garden leave — the pros, the cons, and legal implications of this atypical offboarding process.

What Is Garden Leave? Why Do Companies Use it?

Garden leave is a temporary period where a worker who has announced their intention to leave an organization remains an employee, but they are relieved of their responsibilities. In fact, some companies — especially those in finance — will require the employee to stay away from the office and bar access to any electronic files. 

During this period, the employee remains on payroll and retains access to their benefits. In most cases, the employee typically can’t begin a new role during this time. They’re usually allowed to look for employment, but they can’t sign a contract. Hence the name garden leave: since the person is being paid to not work, they have time for leisure activities like gardening.  

There are several reasons companies use garden leave as a transition instead of having employees continue to work after giving a traditional two-weeks notice:

• Protect data. It’s often used when an individual with access to sensitive information leaves. This period keeps the individual out of the loop long enough for data to become old news. 
• Preserve the work environment. Companies might also use garden leave to protect the current workplace. Turnover can lower morale, but letting the environment slowly transition can help. In addition, keeping the exiting employee out of the office can prevent negative conversations about the company. 
• Shield the company from loss. Often, this policy is used when someone is leaving to work for a competitor. By the time the employee is on the market again, your company will have moved onto newer strategies. Additionally, it can also be used to prevent the employee from taking clients. That’s because the individual isn’t eligible for hiring for several weeks. By the time that lapses, the client has likely moved onto the next project. 

To implement garden leave, some companies will write the policy into hiring contracts. With everything in writing, when an employee leaves, it’s simple to start the process. The exact duration of this period depends on negotiations. Sometimes it might be for a few days or weeks, but garden leave can last months. The average length is 30 to 90 days. 

Legal Considerations of Garden Leave

Garden leave is generally legal for companies to use in the U.S. There are individual state laws, however, that could affect its use. For example, Massachusetts has a 2018 law that allows companies to use garden leave only if they put it into contracts. In New York, it’s illegal to use this policy for lawyers. Consider checking your local state laws for any regulations. 

In most states, you aren’t legally required to include this clause in a contract. Still, you could open your company up to breach of contract lawsuits if you don’t include a clause. This is especially true for senior management and commission employees. That’s because they are often paid based on performance and profit, so it can be harder to ensure they get full payment. The contract would outline exactly how much they can expect in compensation. Consider utilizing a contract clause for these types of workers. 

Garden leave laws typically also require you to pay an individual a certain amount and provide benefits. For example, the 2018 Massachusetts law guarantees an employee half their salary they’d earn during the leave period. While that may feel unnecessary when they aren’t working, the employer is required to comply. In return, the team member typically agrees not to travel. They are also agreeing to be available if you need information or support, or even work from them. That work usually only includes small tasks, like providing a trainee with guidance. 

The Pros of Garden Leave for Employers and Employees

Companies can protect themselves with leave, but employees benefit from a work break too: 

Employers

Here are a few additional advantages of garden leave: 

• The employee is available for any queries before they leave the company. When someone exits, they take their knowledge with them. Leave helps prevent a loss of expertise by giving you a chance to access expertise and train new workers.  
• Itn helps prevent turnover. Sometimes a competitor will poach a worker. With a waiting period in place, that becomes less enticing — helping you retain workers. 
• Your company has time to transition responsibilities to a new employee. Slowly moving tasks to other team members while having the employee on garden leave handle some of their tasks eases the change, which can help prevent burnout in their former teammates. 
• You can reduce the risk someone will provide a competitor with sensitive information. That’s because the team member will no longer have access to records. Even then, they can’t bring relevant data because the knowledge they have will be weeks or months old.

Employees

While it might sound contradictory, garden leave can help employees. Here are some benefits: 

• The employee continues to receive pay. 
• Individuals have to put in very few hours (if any) at work — it’s almost like PTO. 
• They can still use that time to begin pursuing new job opportunities if they do not already have a position lined up. It takes about three to six months on average to get a new job. A paid transition can be a great period to start that journey.
• Depending on the policy, they might still be entitled to commissions and bonuses. 

The Cons of Garden Leave for Employers and Employees

Garden leave isn’t always a perfect solution. There can be drawbacks to consider before deplying this strategy.

Employers

Leave can protect your company, but these are the obstacles that may arise: 

• Garden leave can be expensive. After all, you’re continuing to pay the employee. This adds up when you also hire someone new. You could end up paying double. While it can cost the company, sometimes it’s worth the investment to protect your assets.
• You yield no output from the paid worker.You compensate someone who not being productive. Because of that, you still have to find a replacement — while paying two people.  
• Potential employees can view garden leave as something bad. Individuals too often consider it suspension or a punishment. That could cause future candidates to view your company negatively. In fact, the harder it is to leave your organization, the harder it can be to hire. To counter this perception, you can explain the reasons behind the policy to potential new hires. 

Employees

Employees can suffer some challenges too: 

• The employee is restricted for a certain period of time. They aren’t able to move on to a new position, which can make them feel stuck. 
• It could stagnate their career if it lasts a while. 
• Some employees may lose satisfaction while being paid without “earning” it. 

Garden Leave vs. Non-Compete Clause

Garden leave and non-compete clauses can both be used to keep an employee from working for a competitor directly after leaving. Non-compete clauses prohibit an employee from working in a certain industry for a specified period of time. For example, a financial consultant might agree not to work in the finance industry for six months after leaving. 

The main difference between the two is that garden leave is paid and non-compete clauses are often not. That’s because the non-compete clause doesn’t consider someone an employee anymore. The loss of compensation could lower employee satisfaction, which could affect how potential hires view your company. 

Another difference is that non-compete contracts often last longer. Garden leave lasts, on average, 30 to 90 days while non-compete can last six months to two years. The individual is allowed to find a new job during these years, but they can’t be in their previous industry. However, on garden leave the person can’t be employed elsewhere at all. 

HR’s Role in Managing the Garden Leave

If your company wants to use garden leave, it’s likely the responsibility of the HR department. Here are a few best practices to consider: 

• Consider using software. There are a lot of complexities about managing leave, but HR software can help keep it simple. A tool (like Tilt) can help you manage all types of leave, from parental to garden. 
• Check legal requirements. Regulations vary by location. Collaborate with your legal department to ensure your policy complies with all applicable legislation. 
• Consider using garden leave clauses. If garden leave is appealing, you may want to consider carefully crafted clauses. Having the policy in writing may protect the department in the future.

Moving Beyond Garden Leave: Cultivating Employee Wellness

Garden leave can be an effective way to manage turnover. But even better than a well-executed turnover is improved retention. 

One way to actively work on improving your retention is to focus on employee wellness. About 92% of surveyed c-suites consider wellness programs to be important to retention, according to the 2023 Wellhub Return on Wellbeing Study. When your employees know you care, they’re more likely to stay — which saves you money and morale. 

If you’re looking for ways to get started with wellness, talk to a Wellbeing Specialist today! 

References

• Braithwaite, T. (2019, August 30). Drop non-competes and leave gardening to the experts. Financial Times. Retrieved November 30, 2023 from https://www.ft.com/content/2b3fd5a0-ca3c-11e9-af46-b09e8bfe60c0.  
• Cautero, R. (2022, November 16). How Garden Leave Works. Retrieved November 30, 2023 from https://smartasset.com/financial-advisor/garden-leave.
• Dean, Z. (2023, October 17). How To Know if a Non-Compete Agreement Is Reasonable. Retrieved February 23, 2024 from https://www.lawdepot.com/resources/business-articles/how-to-know-if-a-non-compete-agreement-is-reasonable/#:~:text=A%20Non%2DCompete%20Agreement%20typically,is%20out%20of%20the%20question.   
• Indeed. (2022, September 30). What's garden leave? (6 things you can do during your leave). Retrieved November 30, 2023 from https://uk.indeed.com/career-advice/starting-new-job/garden-leave.  
• Kagan, J. (2023, July 7). Garden Leave: What It Is, Pros and Cons for Employers, Employees. Investopedia. Retrieved November 30, 2023 from https://www.investopedia.com/terms/g/gardening-leave.asp.  
• Katz Law Group. (n.d.). GARDEN LEAVE CLAUSES IN MASSACHUSETTS NON-COMPETE AGREEMENTS. Retrieved November 30, 2023 from https://www.katzlawgroup.com/garden-leave-clauses-massachusetts.  
• Parris, J. (n.d.). How Long Should a Job Search Take? Retrieved November 30, 2023 from https://www.flexjobs.com/blog/post/how-long-should-a-job-search-take/
• Resources for Employers. (n.d.). Garden leave: what it is and how it works. Retrieved November 30, 2023 from https://resources.workable.com/hr-terms/what-is-garden-leave
• SLN Law. (n.d.). What is Garden Leave Under the Massachusetts Non Compete Act? Retrieved February 23, 2024 from https://www.slnlaw.com/what-is-garden-leave.html#:~:text=This%20is%20called%20%22garden%20leave,signed%20after%20October%201%2C%202018.