Gardening leave refers to the period in which the employee is given a termination letter with the notice of termination. In this period, the person is not allowed to work at the workplace; neither the employee is allowed to work from home or from any other location. The salary will be awarded to the employee during the notice period, however restricting him/her to work for his current position in the company or for any other new position. During the period of garden leave, the organization makes sure that the communication between the employee and staff is minimized. Moreover, this period also overviews that customers and clients have no connection with the employee who is under the garden leave.
There are two types of Garden leave. They are:
- One which remains active, till the notice period of termination is served.
- The second type is the one in which the period of garden leave extends even after the termination period.
Duties and Rights under Garden Leave
- The employee henceforth has no rights over the company’s operations or interfering into the daily affairs of the company. He/she is not entitled to work from the workplace, home, or any other location or station.
- The person under the garden leave is restricted to have any contact with the clients, customers, retailers or suppliers of the company. The employee has no access to the company’s database as well.
- Even if the employee is asked not to work for the company, a situation may arise wherein the employee will be asked to be present in the company for some emergency.
- Benefits like salary and other monetary things will be given to the employee. However, he/she may be asked to return the company’s property like Smartphone, vehicle, laptops or any other product.
The need for Garden Leaves
Garden leave is beneficial in many ways. Some of them are:
- If an employee is allowed to work after the termination of the notice period, he/she will have the access of the company’s database which might be harmful to the company as the employee can misuse it.
- The environment of a workplace matters the most. A not working employee is far better than an unproductive and an uncooperative employee.
- For an employee, termination of his/her job is a big deal. Garden leave prevents the employee’s deleterious behaviour, such as influencing the attitude of other employees working in the company.
- There are times when the employee tries to persuade the clients or the customers towards his new job or new venture attracting loss for the company.
Therefore, it is always considered a better option that once the notice of termination is served to the employee, he/she is kept away from the working of the business.
Such agreements are favoured as they are used as a strategy by the organizations and the companies to prevent their employees from leaving their company. Such kind of agreement restricts an employee from joining a company which is directly in competition with his current company. For example, a person working as a delivery boy for “pizza hut” leaving his current job for working as a delivery boy with “dominos”. This kind of agreements makes sure that no crucial information is shared among the organizations. Furthermore, this type of agreements prevents the employee from sharing trade secrets and confidential information.
Article 19 of the Indian Constitution states such agreement as restrictions on the employee’s freedom of trade and business. Therefore, in India, garden leave and non-competent agreements are considered as restrictive covenants. Section 27 of the Indian Contract Act, any restriction put on the person for his/her involvement in his/her choice of business is void.
Niranjan Shankar Golikari v. Century Spg & Mfg Co. Ltd.,
(1967) 2 SCR 378.)
Under this case, the apex court of India explained the difference between the Non-competent agreements and the garden leaves. The court emphasized that the employer of a company has the right to put restrictions on the employee during the contract term, but after the termination restrictions are put on the non-disclosure to another company. However, the employer cannot restrict the employee from joining any other company which is dealing in the same or similar trade.
Percept D’Mark (India) Pvt. Ltd. v. Zaheer Khan & Anr.
(AIR 2006 SC 3426.)
The court, in this case, came out with the verdict that non-competent agreements which are extending beyond the agreement are unenforceable.
Though garden leave clauses aim to protect the circulation of sensitive information of the employer, it should be made sure that they are in restraint of trade and in contravention of Section 27 of the Contract Act. The time period should be kept in mind while drafting a contract for any employee. Garden leave should only be permitted till the date of termination (i.e. during the reasonable notice period), as after that the contract is not enforceable. Therefore, while the employer may set out a garden leave clause in the employment contract, it should only be implemented during the notice period and not beyond that. Hence, it is advisable to hire a professional before such contracts are drafted to avoid any legal consequences in future.