Garden Leave Explained 2025: Costs, Benefits & Employer-Employee Insights

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of ZAMONA.

What Is Garden Leave?

Garden leave is a designated timeframe during which an employee remains on the payroll but is instructed to stay away from the workplace, often during their notice period. During this time, the employee is prohibited from working for competitors or starting new employment, effectively pausing their active work duties while still receiving compensation.

Key Insights

• Garden leave acts as a transitional phase for employees leaving a company, keeping them paid but away from work.
• Employees on garden leave cannot engage in competitive work or self-employment.
• This practice helps protect employers from potential workplace disruption and safeguards sensitive information.
• Employees typically lose access to company premises, confidential data, and communication with colleagues.
• While primarily utilized in the UK, Australia, and New Zealand, Massachusetts became the first US state to adopt garden leave laws in 2018.

Understanding Garden Leave in Modern Workplaces

Though the term "garden leave" might suggest a relaxing break, the reality often includes strict restrictions and limitations on the employee’s activities. It is mainly a strategic tool used by employers to minimize risks when an employee resigns or is dismissed.

During garden leave, employees typically continue to receive their salary and benefits but are relieved from performing their usual job tasks. The term originates from the idea that employees might spend their time tending to their gardens instead of working.

Despite its perks, garden leave can sometimes carry negative perceptions, implying an employee is sidelined or under suspension.

Why Employers Use Garden Leave

Employers may invoke garden leave to prevent employees from disrupting the workplace during their notice period or to protect client relationships and confidential information. It also ensures that competitive knowledge becomes outdated before an employee can join a rival firm.

Employers sometimes prefer garden leave over immediate termination with pay in lieu of notice as it temporarily removes the employee from the labor market.

When to Apply or Avoid Garden Leave

Deciding to implement garden leave requires careful consideration of various factors, such as potential business risks and legal constraints. Employers should evaluate:

• Whether the employee’s departure poses any risk.
• How the transition will be managed.
• Legal restrictions that might limit the use of garden leave.
• The appropriate duration of the garden leave.

Given the financial cost of paying an employee who is not actively working, companies must weigh the benefits against expenses and legal implications.

Rights and Responsibilities During Garden Leave

Employees continue to receive their salary and benefits but might be excluded from bonuses depending on contract terms. Typically, they lose access to company systems and are prohibited from contacting clients, suppliers, or colleagues. Company property must usually be returned.

Employees remain on call to provide support or resume work if requested, so travel or other commitments generally require employer approval. Employers may also mandate that accrued leave be taken during this period.

Quick Fact

Garden leave is also known as "gardening leave" or a "garden leave period."

Garden Leave Clauses in Employment Contracts

While not mandatory, including a garden leave clause in employment contracts—especially for senior roles—is advisable to prevent legal disputes. Without such clauses, imposing garden leave may lead to breach of contract claims.

Employees compensated primarily through commissions or bonuses may challenge garden leave clauses, potentially resulting in legal conflicts.

Pros and Cons of Garden Leave for Employers and Employees

For Employers

Garden leave provides a protective buffer during employee transitions, limiting risks to client relations and sensitive information. However, the financial burden of paying non-productive employees and legal complexities can be significant drawbacks.

• Pros:
  • Ensures employee availability for consultation before departure.
  • Protects customer relationships.
  • Facilitates smooth handover of responsibilities.
  • Restricts employee access to sensitive data.
  • May deter employees from joining competitors immediately.
• Cons:
  • High costs, especially for top executives.
  • Little to no productive output.
  • Legal regulations may limit enforcement.
  • Potential negative impact on employer reputation.

For Employees

Employees benefit from continued pay and time to seek new opportunities, but face limitations on work activities and may experience reduced job satisfaction or career momentum.

• Pros:
  • Continued salary during garden leave.
  • Minimal work requirements.
  • Opportunity to explore other job options (without starting new roles).
  • Potential eligibility for bonuses and commissions.
• Cons:
  • Restrictions on employment activities.
  • Possible dissatisfaction from lack of meaningful work.
  • Risk of stalled career growth, especially with extended leave.
  • Negative perceptions if termination was involuntary.

Garden Leave in the United States

Massachusetts pioneered garden leave legislation in 2018, guaranteeing employees at least half of their base salary during the leave period. Illinois's Freedom to Work Act and recent FTC bans on non-compete agreements are reshaping the legal landscape affecting garden leave. While garden leave is recognized in some New York industries, it remains restricted in others, such as legal professions.

Real-World Example of Garden Leave

In 2019, uniQuire, Inc. included a garden leave clause in the separation agreement with their COO, restricting access to company systems and facilities while ensuring limited consultation during the notice period.

Common Questions About Garden Leave

What Do Employees Do During Garden Leave?

Typically, employees have reduced or no work duties but remain on payroll. Expectations are defined in the separation agreement.

Can I Start a New Job While on Garden Leave?

No, starting new employment during garden leave usually violates contractual terms and can lead to legal consequences.

Does Garden Leave Exist in the U.S.?

Yes, with Massachusetts leading in legislation, and growing recognition in states like New York and Illinois.

What Are the Rules Around Garden Leave?

Rules vary by jurisdiction but generally require notice, last 30-90 days, maintain salary, and restrict work duties and access.

Conclusion

Garden leave is a strategic measure that balances employer protection with employee rights during transitional periods. It ensures business continuity, protects sensitive information, and manages client relationships while compensating the departing employee under defined restrictions.

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