Garden Leave Provisions Garden Leave Provisions

American employers frequently use noncompetition agreements (noncompetes) as a means to protect and defend their business interests. Generally, a noncompete prohibits a departing employee from accepting competitive employment for a specified period of time. American courts usually enforce noncompetes only when they are reasonable and protect an employer’s legitimate business interest. As many courts value free mobility of employees and open and fair competition, courts are commonly cautious when deciding the scope and/or enforceability of noncompetes. This uncertainty has created an environment where employers may be unable to sufficiently protect their interests against departing, well-trained, highly productive employees. A “garden leave provision” may effectively protect the legitimate interests of the business while not causing a financial hardship to the employee.

Garden leave was first developed by English businesses. In the employment context, garden leave, unlike a restrictive covenant, requires that the employee provide the employer with a specific notice period before terminating employment. (A garden leave can also be defined as requiring payment to the employee during the term of the noncompete thereby not allowing that employee to be employed in a competitive employment position during the specified time period.) Greg T. Lembrich, “Garden Leave: A Possible Solution to the Uncertain Enforceability of Restrictive Employment Covenants,” Colum. L. Rev. 2291, 2292 (Dec. 1992). During this notice time, the employer normally does not have the employee work. Instead, the employee is paid salary and benefits, often with the expectation of not working for the employer resigned from. Since the employee remains employed, she can neither work for a competitor nor do anything else to harm or violate their duty of loyalty to the former employer.