Gardening leave describes a situation where an employee gives
notice or is given notice of termination of employment and is
directed to stay away from work for the duration of the notice
period, whilst continuing to pay the employee's
However you need to ensure you have the right to put an employee
on gardening leave. If you don't have that right and act
as if you do, the employee could treat him or herself as being
constructively dismissed. The effect of the wrongful
dismissal will expose you to a damages claim for breach of
employment contract and may also relieve the employee of
post-employment obligations such as restraints of trade.
The Victorian Supreme Court had to determine these questions in
Actrol Parts Pty Ltd v Coppi (No 2)  VSC 694 (9
December 2015). The case concerned an employee who had been
placed on gardening leave following his resignation. During
the gardening leave the employee joined a competitor.
Ordinarily this would be a breach of the employment contract by the
employee. However in his defence, the employee argued the
employer did not have the right to place him on gardening leave and
by doing so it was repudiating his employment contract i.e. in
effect tearing it up, entitling the employee to in turn
"accept' the repudiation bringing it to an end.
In this case, the contract of employment did not contain any
written provision entitling the employer to place the employee on
The Court considered whether the term entitling the employer to
place the employee on gardening leave following his resignation was
an implied term i.e. treated as in the contract because it was
necessary to make the contract work and the parties would have, at
the outset of making the contract, regarded the inclusion of such
term as normal.
The employer argued to imply such a power would be inconsistent
with the managerial nature of the employee's position.
However the Court ruled it was reasonable and equitable to imply
This was because the employee was a sales manager with direct
responsibility for sales representatives within a territory, and it
was reasonable for the employer not to want him to perform actual
work during the period of resignation notice, especially as the
company had reason to think he would go to work with a
competitor. The term would be equitable so long as the
employee's remuneration and entitlements were to be maintained
and the period was short (only a few weeks) and connected with his
resignation. The Court determined that the fact the employee might
receive a little less by way of bonus payments during this period
is not sufficient to warrant a different conclusion.
According to the Court, the term would be necessary to give
business efficacy to the contract because, without it, the employer
would have to maintain the employee in a position where he would
have continuing contact with its sales representatives and
confidential information. It would go without saying because most
reasonable people would so regard such a term. A term permitting
the employer to place an employee on leave with pay during the
period of resignation notice would be clearly expressed and, in the
Court's view, would not contradict any express provision of the
Despite the fact that the Court ruled that the employer had the
right to place the employee on gardening leave, it also ruled that
the employer had breached and repudiated the employment contract by
asking the employee to hand back his motor vehicle and
iPhone. Given these items were part of the employee's
remuneration and salary package, the employer had no right to
remove these items without the agreement of the employee. In
doing so, the employer's actions were repudiatory, allowing the
employee to treat himself as relieved of further compliance with
the employment contract.
Lessons for employers
Ensure there is provision made in employment contracts
entitling you to place employees on gardening leave during notice
periods when either you or the employee give notice of
While an employee is on gardening leave, he or she is entitled
to all the remuneration and employment benefits as if the employee
was working for you ordinarily. Do not remove access to motor
vehicles, mobile phones or other work tools unless you are sure
they constitute 'tools of trade' as opposed to agreed
components of the employee's remuneration package.
If you do not have an express right in the employment contract
to place your employee on gardening leave, you will need to obtain
legal advice as to whether that right arises by implication.
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
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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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