Employment Law Garden Leave and Redundancy
Garden leave and other restrictive covenants 03/10/2012
I always loved the expression “garden leave”. It’s certainly up there with “golden handshake”. It has such warm, fuzzy connotations. You can almost see yourself stretched out on the sun lounger on your immaculate lawn, sun shining and you sipping on a perfectly mixed G&T. And you are being paid by your old boss not to work. Excuse me, is this heaven? Not quite. Ok, then, is this even legal? Being paid not to work? Goodness me, surely there is a law somewhere against this type of hedonism?
What is garden leave in Irish employment law?
So let’s get a few things straight first. We are not talking about taking a few days off to tend to your begonias. We are talking about what happens when you have a clause in your employment contract that says you are not to work for the opposition after you have left the job. It is, in other words, a restrictive covenant. It is normally for a term of 6 months but can be up to 12 months. You are effectively promising your boss that upon termination of your employment with him you will not be available to work with a competitor for the length of time the clause has stipulated.
Why would your old boss want this? Well, if you have been working in a senior position with access to the inner workings of his business it is fair to say some of that knowledge is rattling around in your head and would be very useful to the opposition. It isn’t going to be great for him if you stroll into his competitor’s office on the Monday morning after the going away party with all that damaging information. Even if you are still a little worse for wear.
Gardening leave and employee rights
We used to call them restraints of trade when an Employer sought to restrict your right to compete with him. Nevertheless an Employer is entitled to limit his employees from competing with him after they have finished. You see an Employee owes an implied duty of good faith to his Employer. An Employee on garden leave in Ireland might be working out his notice and still being paid but he is nevertheless contractually obliged to act in good faith. So if it makes sense from a business perspective to have you cool your heels for six months and there is such a clause in your contract then your Boss will certainly invoke the “garden leave” clause.
Your employment contract may have other restrictive covenants concerning the protection of business knowledge. Basically, there is an old law that says an Employer is entitled to protect all his trade secrets. A court will look to see that the information or trade secret has the necessary quality of confidentiality. That doesn’t mean your Boss has to go around and tell you what is and what isn’t a trade secret nor even have it specifically written into your contract. It can be enough that you must have known that the information you are now exploiting could be deemed a trade secret.
Employer rights due to garden leave in Ireland
Finally, what about client poaching and canvassing or soliciting business from your old boss now that you are planning your exit? There is no common law restriction on doing this, so if you are an employer, you would make sure you had a clause to protect this from happening to you. Remember that the general idea is that the law will not allow restraints on normal trade. If you are the employee then you are allowed to use the information you have retained in your head but copying customers lists and using them would be seen as a breach of the employer’s rights. In that case I will see you in the Garden.
Employment Law Expert Shane Healy