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Garden leave is where an employee receives full pay from a business, is otherwise fully employed, but does not come to work and usually does not complete any work from home. While garden leave is not technically a legal concept under employment law in New Zealand, it is a relatively common occurrence when an employee has given notice to resign, or when a difficult situation has arisen. However, there is a lot of uncertainty around:

  • this type of leave;
  • its legality; and
  • when it can be used.

This article will:

  • set out how this type of leave works;
  • address the common misconception that it is the same as a suspension; and 
  • discuss when you should consider this type of leave in your own business. 

How Garden Leave Works

Garden leave must be agreed to by both the employee and the employer. Essentially, the employee agrees to go home and not report for work for a given period of time. You should only put an employee on this type of leave if there is a provision for garden leave in the employee’s employment agreement, which they have entered into in good faith.

These leave provisions in employment agreements can be general or specific.

With any provision, as an employer you will still need to act fairly and reasonably when activating the provision. There are two types of garden leave provisions:

  • specific clauses; and
  • general clauses.

Specific clauses refer to his type of leave being taken in a limited circumstance.

For example, a clause that states the employer may direct an employee not to:

  • report to work;
  • undertake work-related duties; or
  • contact customers or clients during their notice period, but that the employee will receive their full pay for this time.

General clauses give the employer the ability to direct an employee not to:

  • report to work; or
  • do work-related duties at any time and for any reason, but the employee will receive their full pay for this time.

Is Garden Leave The Same As a Suspension?

Suspension and garden leave are different things. The key difference is that you can suspend an employee without their agreement if you have followed a fair process and the other legal requirements.

Suspension is often forced during an employment investigation. Suspending an employee has various procedural requirements. Garden leave should never be used to get around those procedural requirements, like the need for:

  • appropriate grounds for suspension; and
  • a correct process.

When You Should Consider Garden Leave For An Employee

There are a range of scenarios where garden leave may be a useful option to consider. The two main examples are where:

  • an employee has resigned and is on their notice period; and
  • there is a difficult situation in a workplace.

Garden leave may be useful when an employee on their notice period has access to commercially sensitive information and is going to be working for a competitor at the end of their notice period. This type of leave means that that employee stops accessing commercially sensitive information in their day-to-day work. 

Any restraint of trade provision takes effect after the employee’s employment ends. If an employee’s employment agreement contains both a garden leave provision and a restraint of trade provision, the period the employee is on this leave will be taken into consideration in working out whether or not the restraint of trade provision is reasonable.

In a situation where there is a difficult relationship situation at work and you consider that it would help in taking heat out of the situation if one (or both) of the parties stopped attending work while the parties go through counselling or another process. In this type of situation, the employer would need to make sure that the employee agrees so it is clear they are not being suspended or punished, particularly if a formal process has not  taken place.

Key Takeaways

Garden leave is where an employee receives full pay from your business and is otherwise fully employed, but does not come to work and typically does not complete any work from home. It is a useful option in instances where the business would be better off with an employee at home, such as when they have resigned to work for a competitor but have access at work to sensitive information. However, you should ensure that there is a garden leave provision in your employees’ employment agreements that clearly sets out when and how this leave can be used. If you want to know more about this type of leave, feel free to call LegalVision’s employment lawyers on 0800 005 570, or complete the form on this page.

 

FAQs

What if my employee refuses to go on garden leave?

Usually, an employee’s agreement will be required for them to go on garden leave. It may depend on what the the leave provision in the employee’s employment agreement provides for. If there is no leave provision of this type, you should not put the employee on this type of leave. Depending on the circumstances, you should possibly consider suspension.

Is garden leave the same as a suspension?

No, they are different things. Suspension can be done unilaterally, ie without the employee’s agreement, but requires that you follow a fair process and other requirements.

Can I refuse to pay employees on garden leave?

No. All employees on this type of leave should be paid their full pay.

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