Garden Leave

The “Garden Leave” is a contractual clause used mainly in the United States and the United Kingdom, which grants employees a paid leave within the execution of the notice period to prevent them from engaging, during that time, in competitive conduct that could be detrimental to the employer.

One of the contractual obligations to which the employees are bound towards their employer is the loyalty under section 2105 of the Italian Civil Code.  

The rationale of this provision is set in the need to safeguard the company’s business core and, more specifically, its ability to compete with others and, therefore, its position in the market.

Cooperation and, therefore, the fiduciary bond between the employee and the employer are defined as a central element of the business functioning of companies, according to the Italian codified approach. 

The company know-how, as well as the technical and practical knowledge, can be safeguarded through specific clauses within the employment contracts.

The so-called 'Garden Leave' clause (which originated in Britain) exempts the resigning or dismissed employee from rendering employment during the notice period without prejudice to the employer's obligation to pay normal remuneration.

Since they are still employed, the employees have to keep following the employer's directions and are entitled to normal remuneration; however, these employees are, de facto, released from performing their working activities.

The purpose of this clause is to prevent the employee about to leave the company could use the notice period time to seize information capable of causing competition damages to or creating conflicts with the business interests of the current employer. 

By following the described procedure, if the employees re-employ within a competing company at the end of their notice period, they shall not be able to potentially harm the employer by disclosing updated confidential information they could have come up with during the last days of their previous employment.

Notwithstanding this purpose –common to several legal systems – the clause can be implemented through varied ways and diverse conditions in our legal system. The latter cannot be executed within employment contracts; therefore, it will not be possible to grant the employer the option of applying it unilaterally beforehand. However, upon the involved employees’ consent at the termination of their working relationships, they could agree on a period of paid leave in lieu of the worked notice period, thus achieving the same legal result obtainable with the Garden Leave clause at issue.