What is gardening leave?
Gardening leave is a concept where the employer does not require the employee to come to work and perform their usual duties, but the employee still receives their usual remuneration despite not actively working.
Gardening leave usually arises in the following situations:
Where the employee has resigned, and the employer does not want the employee engaging with clients during the relevant notice period;
Where the employee has been suspended while awaiting disciplinary action;
Where the employer is considering terminating the employee; or
Where the employer has provided the employee with time to find alternative employment.
Does an employer have a duty to provide work?
Gardening leave has raised many questions around whether the employer has a duty to provide an employee with work or whether the employer can enforce a right to gardening leave.
There is no automatic implied term in an employment relationship that an employer must provide an employee work. The duty to provide work must be expressly stated in the contract. The primary obligation of the employer is to pay the employee’s wage.
However, if the job requires a particular special skill or talent for example if the employee is a singer, then there may be an obligation on the employer to provide the work.
From a practical perspective, the right of an employer to place an employee on gardening leave must typically be first set out in that employee’s contract.
Does an employer have a right to place an employee on gardening leave?
The issue of whether the employer has the right to place an employee on gardening leave in the first place has been an area of debate. In the case of Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414 the employee resigned, and the employer placed the employee on gardening leave and ordered the employee not to attend work during the notice period. The employee was under a fixed term contract and had resigned before the end of the fixed term. As such the employer refused to accept this and sought an order to prevent the employee from working with a competitor whilst the contract was still on foot. The court upheld that the employer had an express right to direct the employee not to attend work whilst the contract was ongoing.
Similar, in the matter of Actrol Parts Pty Ltd v Coppi (No 2)  VSC 694 the parties were arguing about whether the employer had the right to place the employee on gardening leave under the employment contract. Following the employee’s resignation, the employer placed the employee on gardening leave and during the gardening leave the employee joined a competitor. This normally would have been a breach of the employment contract however, the employee tried argued that the employer did not have an express right under the employment contract to place him on gardening leave in the first place and therefore, the contract was repudiated by the employer and the employee was free to work with the competitor.
The employee in this case was a sales representative with access to clients and confidential information. Therefore, the court said that it was an implied term that the employer could place the employee on gardening leave.
In conclusion, the court deemed the employer could place the court on gardening leave. However, the employer made the mistake of removing the employee’s motor vehicle and mobile phone during the gardening leave which were part of the employee’s salary package. This meant the employee was not receiving his usual remuneration and the employer was found to have repudiated the employment contract and the employee was able to work for a competitor.
Key practical tips
Check employment contracts for clear provisions which enable employers to place employees on gardening leave;
Consider whether an employee is receiving the usual remuneration and employment benefits the employee ordinarily receives during any gardening leave and ensure you understand the legal implications of this;
Seek legal advice if there is no express right for an employee to be placed on gardening leave but you would like to take this course of action;
Seek legal advice about actions taken during the gardening leave by an employee, including searching or obtaining new employment with a competitor.
At Coutts we have experience in drafting employment agreements, reviewing and providing advice on employment agreements and employment disputes. Coutts understands the importance of providing clear and accurate advice to try and prevent disputes in the first place and to resolve them when they do occur as soon as possible. Please contact our Commercial Law department today if you have any questions.
For further information contact:
02 4607 2148