[EMPLOYMENT NZ] GARDEN LEAVE
Is not referred to in employment legislation but is a term sometimes used to describe a period when an employee retains their employment, receives full pay but does not report to work.
Garden leave can be useful when both the employee and employer agree to its use in a particular situation. However, employers should be very careful using it if the employee wants to remain at work.
An employee is entitled and obliged to attend work. An employer can’t ask an employee to go on garden leave unless you both agree (the agreement includes having a garden leave provision in the employment agreement, entered into in good faith). If the employment agreement doesn’t have a garden leave provision, an employer shouldn’t put an employee on garden leave without their agreement. Garden leave shouldn’t be used to get around the requirements for suspension (ie the requirements that there are appropriate grounds for suspension and the right process has been followed).
Employees must continue to follow all their terms and conditions of employment while they are on garden leave.
Garden leave provisions in employment agreements may be general or specific. With any garden leave provision, the employer will still need to act fairly and reasonably when enforcing the provision.
Specific clauses refer to garden leave being taken in a limited circumstance, eg a clause that states the employer may direct an employee not to report to work, undertake work-related duties or contact clients, customers or suppliers during their notice period (but that the employee will receive their full pay for this time).
General clauses give the employer the ability to direct an employee not to report to work or do work-related duties at any time and for any reason (but the employee will receive their full pay for this time).
Garden leave during employee notice periods
If an employee resigns, an employer might want to use garden leave for their notice period for a variety of reasons, for example, the employee:
- has access to commercially sensitive information and is going to be working for a competitor at the end of their notice period. Any limit of trade provision would take effect after the employee’s employment ends.
- However, employers should be aware that if an employee’s employment agreement contains both a garden leave provision and a restraint of trade provision, the period the employee is on garden leave may be taken into consideration in working out whether or not the restraint of trade provision is reasonable (and therefore enforceable). The restraint of trade provision takes effect after the end of the garden leave period.
- is distracting other workers while they’re in their notice period
- is being made redundant and the employer is not requiring them to report to work during their notice period so they can look for other job opportunities while they can still say they’re currently employed
- has been dismissed on notice and their presence is creating an uncomfortable atmosphere for everyone.
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Penny Varley
Payroll Administrator