• The Corporate Compliance Issues of Garden Leaves
  • July 12, 2011
  • Law Firm: Law Offices Of David S. Barmak LLC - Princeton Junction Office
  • With the ambiguity of standard non-compete clauses continuing to loom, many corporations are utilizing a practice which has been in place in the United Kingdom for many years, garden leaves.  A garden leave is the time period between the employee’s removal from his/her position and when s/he is no longer on the payroll.  The agreement warrants that during this timeframe, the employee will continue to receive his/her remuneration to assure that s/he does not engage in interactions with competing corporations.  Often times, when an employee is placed on a garden leave, the policies and procedures are not well defined.  A corporate compliance program should delineate the contractual conditions of the garden leave, and demarcate the required operations, including the extent of the punishment for violating the conditions of the agreement. 

    Following are proposed strategic objectives and performance management for garden leaves:

    1. The organization should determine which positions are most apt to require a garden leave should the employee’s performance not meet the standards of the entity.

    2.  As with non-compete clauses, the conditions of the garden leave should be a part of the employee agreement

    3.  Procedures to assure that these employees do not have access to company information during this timeframe should be outlined.

    4. The Information Technology (IT) department should assign all passwords so that an employee does not the ability to make access to information difficult

    5. Non-compete clauses should be revised periodically as enforceability of these contracts becomes clearer

    6. During the employee’s initial orientation, when discussing the non-compete conditions of the organizations, garden leaves should be included

    7.  When it is determined that a garden leave is in the best interest of the organization, the senior management should include in the employee’s exit interview the conditions of the garden leave, and have the employee sign a document that attests that the information was reviewed and that s/he understand the conditions of this leave.