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What happens when one of your employees resigns and seeks employment with one of your competitors? Is there anything you can do to protect your business’s interests and confidential information in 2025?
In today’s evolving workplace, it is increasingly common for employers to direct an employee to take garden leave after they have given notice of resignation or their employment has been terminated. This strategy helps safeguard sensitive information and prevents the departing employee from immediately joining a competitor.
This article explains everything you need to know before directing an employee to take garden leave, along with useful tips on ensuring your employment contracts are up-to-date and enforceable.
What Is Garden Leave?
Garden leave is a period of paid leave during which an employee is not permitted to work or perform their usual duties. It is typically enforced during the notice period after an employee resigns or is terminated. In 2025, many Australian businesses continue to use garden leave as a practical tool to protect confidential information and minimise competitive risk.
This approach can be an effective way to ensure that a departing employee does not access or misuse company resources to benefit a competitor.
Do I Need To Include A Garden Leave Clause In My Employment Contracts?
Before you direct an employee to take garden leave, it is crucial to understand your obligations and responsibilities. Mistakes can have serious consequences such as breach of contract or potential legal action. While it isn’t mandatory to include a specific garden leave clause in your employment contracts, drafting one alongside restraint of trade provisions helps ensure you have the legal right to impose garden leave if necessary.
The rights of employees are primarily determined by the terms of their employment contracts, provided these terms meet or exceed the minimum standards set by the Fair Work Act 2009 (Cth) and any relevant modern awards. When drafting your contracts, it is advisable to include flexible clauses that allow you to direct an employee to take garden leave when needed. For more insights, check out our guide to employment contracts.
However, there are situations where sending an employee on garden leave could be considered a breach of contract. This is particularly true when:
- The employment contract expressly requires you to provide work-for example, in roles where remuneration is largely performance-based, such as commission or bonus structures;
- The nature of the work is such that continuously performing it is necessary to maintain professional skills, as seen in roles like doctors or surgeons.
Your Obligations As An Employer
When you direct an employee to take garden leave, several obligations arise. Importantly, you remain bound by the employment contract even if the employee is not actively performing work. This means that you must continue paying all wages and entitlements throughout the garden leave period. Any reduction or failure to pay what is due could amount to a breach of contract.
It is also critical to clearly define the period of garden leave in the contract, as leave cannot be imposed indefinitely. For further guidance on ensuring your agreements remain compliant, have a look at our employment contract review services.
What Does Your Employee Have To Do While On Garden Leave?
While on garden leave, an employee remains bound by the terms of their employment contract. This generally means they must continue to act in the business’s best interests and refrain from disclosing any confidential information. Additionally, if their contract restricts them from working for another employer during this period, those restrictions remain in force.
Typically, employees on garden leave are not required to attend the workplace or perform their usual duties; however, they are expected to remain contactable and available if their expertise or input is needed. Should they breach any contractual term during this time, you may be entitled to seek remedies for the contravention.
How Does Garden Leave Help Your Business?
The advantages of garden leave stem largely from the fact that an employee’s contractual obligations persist throughout the notice period, even though they are not actively working. This arrangement helps ensure that the employee continues to protect your business’s interests during a critical transition period.
By restricting access to company premises and resources, garden leave reduces the risk of a departing employee misusing confidential information or soliciting clients. This protective measure can be especially valuable in industries that are rapidly evolving. For further insight into how you can safeguard your business, you might find our Modern Award Analysis article useful.
Moreover, as workplace practices continue to evolve in 2025, it is essential to regularly review your employment contracts and garden leave provisions. Consulting with legal professionals ensures that your contracts remain compliant with current laws while effectively protecting your business interests.
What Have The Courts Said?
Garden leave has been examined at the highest levels of Australian courts, which have provided important guidance on its application and implications for both employers and employees.
Actrol Parts Pty Ltd v Coppi (No 3)
The case of Actrol Parts Pty Ltd v Coppi (No 3) [2015] remains a significant reference point. In this case, Mr Coppi was placed on garden leave for his four-week notice period after resigning to join a competitor. During this period, Actrol recalled the company car and phone provided as part of his remuneration, actions which the Court scrutinised closely.
The Court emphasised that employers must continue to pay all wages and entitlements during the garden leave period. It also held that garden leave can only be imposed if it is an express or implied term of the employment contract. For more on ensuring your contracts are robust, please refer to our discussion on what makes a contract legally binding.
Grace Worldwide (Australia) Pty Limited v Alves
In Grace Worldwide (Australia) Pty Limited v Stephen Alves [2017], the Supreme Court of NSW examined an employer’s right to direct an employee to take garden leave. Mr Alves had tendered his resignation to take up a CEO role with a competitor, and his employer directed him to take garden leave for the entirety of his three-month notice period.
Mr Alves contended that garden leave amounted to a repudiation of the contract, thus relieving him of his restraint of trade obligations. However, the Court ruled that as long as the employee’s remuneration was maintained, the imposition of garden leave-as an implied term of the employment contract-was lawful. This decision underscores the importance of clearly articulating garden leave provisions in your contracts. For further guidance, check our employment contract resource.
Need Help?
Ensuring your business is fully equipped to handle an employee’s departure is crucial. Whether you need advice on protecting your business interests, drafting comprehensive employment contracts, or updating your garden leave clauses to comply with current legal standards, our team of friendly lawyers is here to help.
You can reach us at team@sprintlaw.com.au or call us on 1800 730 617 for a free, no-obligation chat. For more legal insights and updates relevant to 2025, explore our Guides.
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