# Garden Leave Explained: Benefits and Drawbacks for Employers and Employees

![Garden Leave: When an employee leaves a job but remains on the payroll and is not permitted to work elsewhere.](https://www.investopedia.com/thmb/QSjRJwT88xvVY-8CdgbnEWLweI4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/gardening-leave.asp-Final-7471c814f0484fb78b14cd1689c235bb.jpg)

*— Investopedia / Yurle Villegas*

## What Is Garden Leave?

Garden leave, popular in the financial industries of the U.K., Australia, and emerging in the U.S., refers to a period when an employee, while still receiving a paycheck, stays away from the workplace during their notice period.

Not allowed to undertake new employment or work functions at their current company, employees on garden leave remain on the payroll, protecting the company’s interests by limiting access to sensitive information and avoiding disruptions. This strategic practice, while financially burdensome for employers, serves as a protective measure against potential risks during employee transitions.

### Key Takeaways

*   Garden leave is a period during which an employee resigning or being terminated continues to receive salary and benefits but is restricted from working for competitors or in any capacity that could harm the employer's interests.
*   Primarily used as a protective measure, garden leave helps employers safeguard sensitive information and relationships with clients by keeping departing employees out of the workplace and away from certain data or contacts.
*   Although Massachusetts was the first U.S. state to codify garden leave in 2018, the practice is common in the U.K., Australia, and New Zealand and continues to gain traction in states like Illinois and sectors like New York's financial industry.
*   While it offers employees continued compensation and freedom from work duties, garden leave can limit their ability to start a new job or interact with former colleagues, potentially impacting their career satisfaction and development.
*   Employers must weigh the financial costs and legal complexities of implementing garden leave against the need to protect their business interests, as exorbitant costs and potential legal challenges in its enforcement can be consequential.

## Navigating Garden Leave Norms and Practices

The term "garden leave" is often used in the financial sectors of the U.K., Australia, and New Zealand. In 2018, Massachusetts became the first U.S. state to enact a garden leave law.

While the name garden leave may sound pleasant—and in fact, an employee may sometimes prefer to serve their notice time relaxing at home rather than being in the workplace—the restrictive nature and negative implications of this leave can make it less than ideal.

Garden leave is a protectionist measure used by an employer when an employee is terminated or when they [tender their resignation](https://www.investopedia.com/articles/personal-finance/081015/8-reasons-why-valued-employees-quit.asp). Once in effect, it often prevents the employee from being involved in any work activity for their current employer, and typically restricts them from either taking on another job or working for themselves. Employees might use this time to pursue hobbies like gardening, which is where the term "garden leave" originates. Salaries and benefits continue until the end of the leave period.

Garden leave is sometimes considered to be a euphemism for being suspended and can be perceived to have negative connotations, such as the employee being unfit for anything other than tending to their garden.

> **Important**
>
> The garden leave helps protect an employer's interests when an employee tenders a resignation or is given a dismissal notice.

## Why Employers Use Garden Leave

Following the resignation or dismissal of an employee, an employer may decide to place the employee on garden leave. The primary reason for doing so is to safeguard against possible detrimental actions or behavior that the employee might indulge in during their [notice period](https://www.investopedia.com/terms/n/notice-of-termination.asp).

The employer may fear that the employee could become uncooperative, or that they may negatively influence the working environment and other employees. The employer may also prefer that the employee limit contact with clients for fear the employee may persuade clients to follow them to their new employer.

Another reason for implementing a garden leave is that the employee may have access to up-to-date information that could be beneficial to the employer’s competitors. Placing an employee on garden leave could help ensure that by the time the employee is contractually free, they would have been out of the loop long enough to reduce any possible threat.

Garden leave can be an employer’s way of taking the employee off the market for a period of time, which is why some employers may opt for this method, rather than ending the employment abruptly with a cash settlement in lieu of notice.  

## Assessing the Appropriateness of Garden Leave

There are times to consider a garden leave, and there are times it is not suitable. A garden leave is to be used when a worker's employment term is being brought to an end for any reason. The first step in evaluating whether to use a garden leave is to consider the implications of the employee's departure. Questions to ask include:

*   Will the employee's departure expose the business to [risk](https://www.investopedia.com/terms/r/risk.asp)?
*   What will the transition period look like as the employee leaves the company?
*   Are there legal restrictions in place preventing a garden leave?
*   What will the garden period duration be, and why should it be this long?

Due to the expense of carrying an important employee that is not working, companies should be mindful when imposing a garden leave. In addition, companies may find themselves legally unable to impose a garden leave. Therefore, when determining whether or not to place an employee on a garden leave, a company must analyze the financial implications, legal restrictions, and business usefulness of temporarily retaining the employee.

## Employee Rights and Obligations During Garden Leave

An employee is entitled to their salary and benefits during garden leave, but depending on their employment contract, may not be eligible for bonuses or [accrual payments](https://www.investopedia.com/terms/a/accruedincome.asp).

During a garden leave, it is typical for an employee to be prevented from accessing the employer’s data and computer system, and to be prohibited from contacting clients, suppliers, or fellow employees. The employee will usually be required to return company property such as laptops, smartphones, or vehicles during this period.

During garden leave, employees must stay available for employer requests, whether for information, support, or a return to work. For this reason, an employee should not plan to travel during garden leave, unless approved by the current employer. An employer may also compel the employee to take any accrued holiday time during the period of garden leave.

> **Fast Fact**
>
> Garden leave is also commonly referred to as a "garden leave period" or "gardening leave".

## Understanding Garden Leave Clauses in Employment Contracts

An employer does not need to put a garden leave clause in a contract during the on-boarding process when a new employee is hired, but they are recommended in certain cases. Some contracts, especially those for senior management and other executives, often come with a well-drafted garden leave clause. If a company decides to put the leave in effect without one, it opens itself up to a breach of contract dispute.

Contractual clauses can be tricky, especially for employees paid through bonuses or commissions who may dispute the clause due to their performance-based incentives. These cases may result in disputes—even lawsuits—between both parties.

## Evaluating the Benefits and Drawbacks of Garden Leave

### Employer

There's a number of reasons why a company may consider implementing a garden leave. It's a defensive measure to ensure employee availability during transitions and to manage client relationships as employees leave.

Employees on garden leave usually face restrictions on building access and confidential information to prevent misuse.

The downside to this is primarily the cost. An employer must continue to pay an employee during garden leave; if that worker is a [C-suite](https://www.investopedia.com/terms/c/c-suite.asp) executive, the company is paying very high salary costs to retain someone who is producing little to no work. There are also legal considerations to balance, public perception to manage, and ongoing risk of employee retaliation even when still under contract.

### Garden Leave - Employers

Pros

*   Ensures that an employee will be available for queries prior to their departure
    
*   Prevents a customer from stealing customers prior to their departure
    
*   Ensures proper transition of responsibilities
    
*   Prevents an outgoing employee access to certain sensitive aspects of a company
    
*   May prevent an employee from leaving to work for a competitor
    

Cons

*   Is often expensive, especially when putting an executive on garden leave
    
*   Yields little to no productive work in exchange for actual salary paid
    
*   Requires adherence to complicated, changing laws that may restrict some aspects of garden leave
    
*   May negatively impact perception of future prospective employees
    

### Employee

From an employee's standpoint, much of the opposite is true. The employee has meaningful, paying employment via the [terms of employment](https://www.investopedia.com/terms/t/terms-of-employment.asp) through a specific contract date. During this employment period, the employee's responsibilities are often decreased. An employee is often allowed to search for a new job during this period, though there are limitations on starting a new job while on garden leave. An employee is often still entitled to commissions and bonuses during garden leave.

On the downside, employees may be restricted on what they do such as start a new job or work for a competitor. An employee may not find personal satisfaction in getting paid but not being able to contribute to the success of an organization. An employee may end up leaving a company with a bad taste in their mouth if they are cutoff from socializing with peers in which they have developed relationships with.

### Garden Leave - Employees

Pros

*   Receives paychecks for a defined period of time
    
*   Is often required to work little to no hours in exchange for ongoing compensation
    
*   May still pursue (but not start) other job opportunities while on garden leave
    
*   May still be entitled to bonuses and commission while on garden leave
    

Cons

*   Faces restrictions on what they can do for a specific amount of time
    
*   May not find personal satisfaction for technically not "earning" their paycheck
    
*   May delay career progress during lengthy garden leave periods, like 90 days.
    
*   May be seen as negative should the employee be getting let go or terminated against their will.
    

## Garden Leave in the U.S.

[Massachusetts passed the garden clause provision](https://www.apnews.com/34d7fc49684a4c80a16c7a20c1022533) into law in mid-2018, making it the first state in the United States to give workers paid leave after leaving a job, according to the Associated Press. The new law states employees are entitled to at least 50% of their base salary during the garden leave.

In 2021, Illniois passed the Illinois Freedom to Work Act (IFWA). Though the IFWA never mentions the phrase "garden leave", it does restrict Illinois employers regarding their ability to bind employees to non-compete and non-solicitation agreements. In turn, this legislature would impact the limitations that can be placed on an employee while on garden leave. Additionally, in April 2024, the FTC banned the use of non-competes.

Though present in New York financial industries, garden law is still explicitly prohibited in many cases. For example, the New York Rules of Professional Conduct published by the New York State Bar Association outlaws garden leaves. This rule prevents an agreement that prohibits a departed lawyer from practicing law for any given period of time following his or her withdrawal from the firm.

## Example of Garden Leave

The Securities and Exchange Commission (SEC) publicly posted Exhibit 10.3 related to the separation agreement between uniQuire, Inc. and its former Chief Operating Officer. In August 2019, it decided to part ways with its employee. In the cited agreement, the separation letter called for several items including:

*   A garden leave period between Aug. 19, 2019 and Aug. 31, 2019 (the official date of resignation).
*   The garden leave period will result in the COO not having access to the company's facilities or electronic systems.
*   The garden leave period will call for reasonable consultation and assistance as needed in support of the Chief Executive Officer.
*   All business transacted on behalf of the company during the garden leave period should be with company officers only.

## What Do People Do During Garden Leave?

During a garden leave, most employees are required to produce little to no work. They will remain on the company's payroll for a designated amount of time. However, they may not be contractually obligated to fulfill all previous aspects of their job. When placed on a garden leave, the expectations of the employee are often outlined.

## Can I Start a New Job While on Garden Leave?

A garden leave is often a mutually agreed upon, contractual obligation between a company and an employee. An employee is often allowed to pursue other jobs, but courts have found there to be a breach of contract should the employee leave to begin a new job during a garden leave.

## Does Garden Leave Exist in the United States?

Yes, garden leave exists in the United States. The concept was passed into law in 2018 in Massachusetts, while it has been widely adopted in New York while also gaining traction in Illinois.

## What Are the Rules Around Garden Leave?

Garden leave laws will vary across jurisdictions. In general, most garden leave laws require advanced notice of resignation and last between 30 and 90 days. During this time, the employee remains on the company's payroll but are generally relieved of most (if not all) of their duties. An employee can often not return to the physical workplace, and the employee may be required to communicate with only select co-workers during the garden leave period.

## The Bottom Line

To protect company assets and preserve business interests during an employee departure, a company may place an outgoing worker on a garden leave. This paid recuse from work often reduces the employee's scope of work prior to their pre-planned resignation. In addition, the employee will face many restrictions on what they can do, what they can access, and who they communicate with prior to their departure.

> **Article Sources**
>
> 1.  The General Court of the Commonwealth of Massachusetts. "[Acts (2018) Chapter 228. Section 21](https://malegislature.gov/Laws/SessionLaws/Acts/2018/Chapter228)."
>     
> 2.  Illinois General Assembly. "[(820 ILCS 90/) Illinois Freedom to Work Act](https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=3737&ChapterID=68)."
>     
> 3.  FTC. "[FTC Announces Rule Banning Noncompetes](https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes)."
>     
> 4.  New York State Bar Association. "[NYSBA NY Rules of Professional Conduct (2021)](https://www.nycourts.gov/ad3/AGC/Forms/Rules/Rules%20of%20Professional%20Conduct%2022NYCRR%20Part%201200.pdf)."
>     
> 5.  U.S. Securities and Exchange Commission. "[Exhibit 10.3](https://www.sec.gov/Archives/edgar/data/1590560/000141057819001349/tv529829_ex10-3.htm)."
>     
> 6.  Warner Goodman LLP. "[Can I Work for Someone Else During my Garden Leave?](https://www.warnergoodman.co.uk/site/blog/news/can-i-work-for-someone-else-during-my-garden-leave)"
>     
> 7.  Thomson Reuters. "[Garden Leave Provisions in Employment Agreements](https://2ec2b246x45d31849pmcrgzb-wpengine.netdna-ssl.com/wp-content/uploads/2021/12/Steinmeyer-Rasnick-Garden-Leave-Provisions-in-Employment-Agreements-2021-Update-w-007-3506.pdf)."