Employers may find themselves in a financially onerous position
if correct procedures aren't followed when placing staff on
"garden leave" – it's not always as straight
forward as it seems. It's best to know the do's and
don'ts in this situation before going down the "garden
It is increasingly common practice for employers to direct an
employee to take so called "garden leave" after an
employee has given notice of termination of employment. Whilst on
garden leave, the employee is required not to attend the workplace
or perform duties but remains on full remuneration. This is useful
to the employer where the employee has resigned to take up
employment with a competitor.
Going down the wrong path
In the recent case of Actrol Parts Pty Ltd v Coppi (No.2) 
VSC 694, the Victorian Supreme Court confirmed the legality of this
practice and made some interesting comments about the increasing
use of garden leave.
In this case, the employee gave the employer four weeks'
notice of resignation to take up employment with a competitor, and
commenced employment with that competitor half-way through the
notice period. The employer discovered this on the former
employee's second day of employment at the new competitor, and
obtained a search order executed at the former employee's home
where a number of computers and like devices were found and taken
At the trial of the action for nominal damages only, the
employer alleged that the former employee had breached his contract
of employment by commencing work for a competitor when he remained
an employee of the employer until his notice of resignation
expired. The employee contended that by placing him on garden leave
and taking away his company-provided motor vehicle, his former
employer fundamentally breached and repudiated the contract,
thereby leaving him free (by way of acceptance of that repudiation)
to commence new employment.
The Court held
An employer can only direct an employee to take garden leave
when the contract expressly or impliedly so provides
In the absence of express contractual provision, the court will
imply a garden leave provision for the duration of a resignation
notice period, but not otherwise
The employer must maintain all of the employee's
remuneration and entitlements during the notice period to qualify
as garden leave.
The requirement for the employee to deliver up his
fully-maintained company car when directed to take garden leave for
his notice period constituted a repudiation of the contract of
employment by the employer. This was because the fully-maintained
company car was part of his remuneration package rather than
required for the performance of his duties (ie as a tool of
Accordingly, the contract of employment came to an end on the
second day of the former employee's employment with the
competitor because on that day, the former employee communicated
his acceptance of his former employer's repudiation of the
contract of employment. This left the employee free to take up new
employment with the competitor without serving the balance of his
notice period and the employer likely to be liable for a
significant costs order.
DO revise and amend all employment contracts inserting an
express power to put an employee on garden leave during any notice
period or at any time at all.
DON'T reduce or remove any remuneration or benefits payable
to the employee when directing an employee to take garden
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.Madgwicks is a member
of Meritas, one of the world's largest law firm
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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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