How to impose Garden Leave without express power

Companies often wish to put senior executives on garden leave during a notice period so that the employee stays away from work and must not contact colleagues, customers or suppliers. That scenario is intended to protect the ongoing business from unwanted activities of an employee who is about to leave.

Until now, the general position in law had been that if there was no express clause in the service contract allowing the company to impose garden leave, it could not be done, unless the employee were to agree.

The High Court, in SG&R Valuation Service v Boudrais , has recently changed that position. The Court decided that an employer can sometimes force garden leave onto senior directors, even when there is no such right in the contract.

In this case, two directors resigned to join a competitor. There was good evidence that they intended to misappropriate confidential information of the employer. The employer insisted on a period of garden leave. That would delay the date when the directors joined their new employer. The employees did not agree. The company applied for an injunction from the court to enforce that garden leave. The employees resisted. They said there was no garden leave clause in their service contracts, they had a right to work, and that by not providing work the old employer was in breach of contract. That breach, they said, entitled them to leave and join another company.

The court said that the implied right of the employee to be provided with work is subject to the qualification that the employees have not, as a result of some prior breach of contract or other duty, made "it impossible or reasonably impracticable for the employer to provide work". As there was an arguable case on the documentary evidence that the directors had breached their contracts or duties, the judge said that they had no right to be provided with work by the old employer. This meant that the employer could insist on a period of garden leave. The injunction was granted.

Alan Lewis of George Davies' employment team says:

“Companies should note that this decision turned very much on the facts and that the employer was lucky enough to have come across evidence to show wrongdoing by the employees. Nevertheless, this decision could prove to be useful to protect businesses in similar circumstances.

When looking to put employees on garden leave, professional advice should always be taken. The last thing the company wants to do is to act in breach of contract which, amongst other things, could mean that any non-competition or non-poaching of customers covenants fall away and are completely unenforceable.”

Alan can be contacted on 0161 234 8812 or by e-mail: alanlewis@georgedavies.co.uk