Australia: Directing an employee to go on gardening leave

IN BRIEF

When an employment relationship comes to an end, there are various mechanisms available to an employer to protect their business interests from an ex-employee. One such mechanism is to place the employee on gardening leave. Habersberger J of the Victorian Supreme Court described "gardening leave" as a "colloquial or euphemistic term for an employer insisting that an employee, who has given notice, stay away from work for the duration of the notice period, whilst continuing to pay the employee's remuneration."

ADVANTAGES OF GARDENING LEAVE

A key advantage of gardening leave is that the employee is not present at the workplace. This helps protect the employer from an employee collecting confidential information or soliciting clients or other employees to leave the business with them. Another advantage is that the employee is still technically employed, meaning the employee is still bound to comply with reasonable directions from their employer, including being directed to work from home, and providing assistance with handing over to a new employee. The employee also remains bound by contractual obligations which exist during the currency of the employment relationship. These often include such things as an express prohibition on working for someone else, and acting in the best interests of the employer. There are also obligations implied at common law such as an employee's duty of fidelity which continue during the gardening leave period.

WHO CAN BE DIRECTED TO GO ON GARDENING LEAVE?

If an employment contract expressly provides for gardening leave, there is generally no argument around whether it is lawful or not for the employer to direct an employee to go on gardening leave. Where the employment contract is silent on this topic, the question arises as to whether the employer may still lawfully direct an employee to go on gardening leave or not.

The answer to this question will be informed by whether the contract of employment is one that requires the employer to provide the employee with work or merely to pay the employee the remuneration required under the contract. The two categories of contract were explained by Lawrence LJ in Marbe v George Edwards (Daly's Theatre) Ltd as follows:

"Contracts of employment fall under two categories; first those in which the only obligation imposed upon the employer is the payment of the agreed remuneration, and no duty is cast upon the employer to give active occupation......; and secondly those in which the employer engaged not only to pay the agreed remuneration but also to afford to the employee an opportunity of doing work for which he is engaged".

A contract which falls into the second category may do so by express words or by virtue of the type of work performed. The courts have found that where an employee has a particular skill or talent which needs to be kept in regular activity, such as a surgeon or television personality, the court may be prepared to find, where there is no express obligation to the contrary, that there is an obligation on the part of the employer to provide the employee with work.

An example of such employment requiring the provision of work was demonstrated in Curro v Beyond Productions Pty Ltd where the Court said that Ms Curro, a television presenter, was entitled to be given "work of an appropriate quality to keep her name and talents before the public with reasonable frequency" and that "the production company had no contractual right to sterilise Miss Curro's services and keep her away from the viewing public".

Mann v Capital Territory Health Commission is another example concerning a surgeon. The Court in this case held that the employee "needed an adequate amount of work to maintain his skills and his standing among professional colleagues".

Therefore, it is apparent from the authorities that unless the contract of employment expressly requires the provision of work, or the employee is of a kind where such an obligation will be implied, then employers, may generally speaking, direct their employees to go on gardening leave even in the absence of a dedicated clause covering gardening leave. It is self evident that the inclusion of such a clause is useful to employers and should avoid potential arguments around the lawfulness of any such gardening leave direction.

PROTECTING YOUR BUSINESS INTERESTS

The inclusion of an express "gardening leave" clause within an employment contract along with an enforceable post termination restraint of trade clause are useful ways in which employers may seek to protect the goodwill in their business from potential loss that may be caused by ex-employees soliciting work from their clients, or acting in competition (for a prescribed period). Such provisions also complement provisions protecting the confidentiality of their business information.

For further information, please contact:

Richard Ottley, Partner
Phone: +61 2 9233 5544
Email: rbo@swaab.com.au

Ellen Davis, Solicitor

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.