If you’re new to the American business environment, you’ve probably heard of gardening leave but might not fully understand what it is. Simply put, gardening leave is when an employee resigns from a company but can’t look for a new job because of a prior agreement with the company. Basically while in gardening leave, you’re not allowed to work, but you still receive a salary.
Why is this a thing? And is it really as good as it sounds? Here’s what you need to know about gardening leave.
An overview of Gardening Leave in the US
Gardening leave is a form of legal protection that companies take when hiring senior executives or employees who are given access to trade secrets and highly classified information. It originated in the UK and gained popularity in the US when Massachusetts made an official move to turn this into law in 2018. Under this new law, employees who resign and have a contract with a gardening leave clause get at least 50% of their base pay.
This practice aims to keep the employees who’ve resigned and have non-compete contracts on payroll. How long this goes on depends on when classified information they have access to becomes obsolete or until their replacement gets fully settled in their old position.
Important vocabulary related to Gardening Leave
Here are important business English phrases to help you understand the basics of gardening leave:
- Non-compete agreement: This is a written contract that prohibits an employee from working for a competitor during and after employment.
- Hourly wage workers: These are workers who are paid by the hour. Under the new Massachusetts law on gardening leave, these workers are exempt from signing contracts with gardening leave clauses.
- Duty of confidentiality: This is an obligation of the employee who signed a contract with a garden leave clause to keep trade secrets and other confidential business information from competitors. A breach can result in a suit for damages filed against the employee by the company.
How Gardening Leave works
While each state in the US has specific laws about gardening leave, it primarily protects the company. It takes effect when an employee resigns or is terminated but is still considered technically employed by the company and isn’t allowed to work for a competitor. During this period, the employee could still work remotely but is typically no longer allowed to work on-site. They also aren’t allowed to contact other employees, customers, and vendors, and are temporarily barred from seeking other employment.
While that makes sense, where does the name “gardening leave” actually come from?
Well, because of this state of “unemployed employment”, an employee on gardening leave has the free time to exercise, enjoy the outdoors, and of course, garden. By simply vowing not to seek new employment within a certain period, employees on gardening leave enjoy their salary and other fringe benefits.
Gardening leave is implemented for various reasons. It could be because the employee has valuable work experience or access to recent trade secrets, time-sensitive data, and proprietary information that a competitor can use. It could also be enforced when the employee-employer relationship didn’t end well. The employer could be concerned that their employee might engage in damaging or disruptive behaviour and to prevent this, gardening leave is implemented.
The pros of Gardening Leave
Gardening leave offers several benefits to both the employer and the employee. Preventing an employee from working for your competitors means you can avoid trade secrets and business development plans falling into your competitor’s hands. Just imagine the losses you would incur if you allow your senior executive to jump ship and sell your trade secrets to the highest bidder.
For employees, getting full or at least 50% of your base pay without doing anything makes a gardening leave clause on your contract reasonable. On top of that, you can also keep using the devices, tools, and equipment issued to you by your company. If you were given a company car, for example, you could still use that for private purposes when you’re put on gardening leave.
The cons of Gardening Leave
But of course gardening leave also comes with some disadvantages. For employers, keeping someone on your payroll even if they are no longer productive costs money. Adding non-compete agreements and gardening leave clauses in your employment contract is also not a simple matter. If not done right, you can set yourself up for legal repercussions if your employee files to nullify the contract on the grounds of coercion.
Employees also lose out when gardening leave is in effect. Since US law only provides for a payment of at least 50% of your base pay, there’s no guarantee that your company would pay you higher than that. If you only get 50% of your usual salary for more than a few months, you’re likely losing income you were used to receiving.
How to get legal help if your employee enacts Gardening Leave
Conflict happens when the terms of the contract are not clear or appropriately explained from the beginning. Since the agreement can only be binding if both parties voluntarily agree on the terms, any party in the contract can pretend they misunderstood its provisions and petition that it be declared void from the start.
The best way to avoid further losses from the enactment of gardening leave is to ask your company lawyer to explain the employer and employee’s obligations under the contract. If you’re planning to work in the US, it’s good practice to understand the work culture so you always know what you’re getting into.