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Consider Garden Leave Employment Termination Clauses

By Anthony Cerminaro

"'Garden leave' has become a common tool in English employment contracts for curtailing a departing employee's ability to work for the competition. Anecdotal evidence suggests that American employers, primarily on the East Coast, have begun inserting garden leave clauses into employment agreements. The enforceability of the garden leave clauses, however, remains untested in California courts.

"As it has developed in England, 'garden leave' describes a situation where an employee must give notice of termination a significant period of time prior to the effective date of termination. The employee then is required to spend the time between the date of notice and the termination date away from the office, i.e., at home 'in the garden.' The employee receives full payment of salary and benefits, but is precluded from contact with customers or the employer's confidential information; most importantly, the employee is precluded from beginning employment with a new employer until the garden leave expires. The length of the garden leave varies, but in the reported English cases generally runs from six to eighteen months in length.

The obvious benefit to the employer from a garden leave provision is that it prevents the employee from working for a competitor until such time as his/her current technical knowledge has become less useful to a competitor, the contacts with customers have become dated, or the employee is otherwise rendered less valuable to a competitor. The cost to the employer may be significant in paying the full salary and benefits to an employee for a lengthy period of time while the employee is not engaged in any productive activity on behalf of the employer. Thus, such clauses may be appropriate only for senior executives, key technical employees or others who have access to truly confidential information and/or key clients. Read more in this pli.edu article

Full post as published by Bizz Bang Buzz Blawg on June 05, 2008 (boomark / email).