What In-House Counsel Should Know About 'Garden Leave' Clauses

Your CEO just returned from a conference in London where he heard about this thing called “garden leave,” and he asks you: Can a company require its key U.S. employees to give lengthy advance warning of their intent to resign, send them home as soon as they give notice and prohibit them from competing in any way until the notice period expires? The answer may well be yes. As in-house counsel, you need to be up to speed on this development, which is rapidly crossing the Atlantic and coming your way.

The growth of garden leave clauses is, at least in part, a response to the frustration some in-house counsel and their clients have experienced with the unpredictability of enforcing traditional noncompete clauses. Indeed, in Great Britain as well as the United States, a common judicial concern in some noncompete injunction cases has been the financial impact on the employee, particularly where that individual is the sole breadwinner in her family. Indeed, most jurisdictions require the court to consider the impact of the proposed injunction on the defendant. Garden leave clauses may alleviate some of this concern because the employee is compensated during her time on the sideline.