Gardening Leave Remedies

I wrote about the uses of gardening leave here. What if an employee decides to breach the gardening leave contract? I thought only injunction relief until I read Protect your firm when staff leave from Microscope in the UK.

Getting an injunction as set out in this paragraph ought to be familiar to anyone filing a suit on a non -compete agreement:

The employer can apply for a court order, an "injunction", to enforce either the employee’s implied duties of honesty, loyalty and faithful service; and/or any express term such as a garden leave clause which will prohibit the employee from having other business interests during the course of employment - which includes employment with another employer.

When does the litigation being? When there is a garden leave agreement in place and the employee quits without giving the notice required under the agreement.

By resigning without notice the employee is breaching the contract. To enforce a garden leave clause, the employer should refuse to accept the attempted termination of the contract, hold the employee to the obligation to give notice and (assuming the contract so empowers you) suspend them for the entire notice period. Where, however, despite these steps, the employee commences work elsewhere, injunction proceedings (see above) may be required.

It is for the client to decide if suit needs filed, but with the remedy being an injunction the time spent on reaching a decision can be injurious to both the business and the suit.

Although framed as a breach of fiduciary duty, Bartholomew v. Alstom Power, Inc., (SD Ohio, Eastern Div. 2005)does involve a garden clause. Violating the garden clause was used by the former employer as one basis for the lawsuit. On the other hand, the jury decided against the employer.

The New South Wales (Australia) courts limited any remedy during garden leave. Mallesons Stephen Jaques noted this in its Can an employer enforce restraints during gardening leave?

The Supreme Court of New South Wales has held that an employer could enforce restraints against an employee on extended gardening leave only to the extent that the restraints were reasonable.

The employee, a broker, was on a fixed term contract which included a restraint on taking up employment with a competitor or soliciting clients or employees. The restraint purported to apply during the term and for three months afterwards. The employee resigned more than a year before the end of the term to take up a position with a competitor. The employer continued to treat the contract as on foot. It placed the employee on gardening leave (that is, continued to pay him but did not require him to attend for work), and sought an injunction preventing him from working for the competitor for the balance of the contract term.

The Court held that while the contract had not been terminated by the employee’s resignation (because it was for a fixed term, and the employer had not agreed to termination), the employment relationship had come to an end. While non-compete and non-solicit restraints are generally enforceable during employment, after employment they are only enforceable to the extent they are reasonable and not contrary to public policy. Based on the nature of the employment and the employer’s business, the Court held that in this case a reasonable period was six months. This meant the employee was prevented from competing or soliciting clients or employees for only six months after he resigned (despite the fact that the fixed term contract continued for a longer period, and the employee would have been paid for the time he was out of the workforce).

Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852