Garden Leave In Australia: What Employers Should Know

When a key employee resigns or you’re ending their employment, it’s normal to worry about client relationships, confidential information and team morale.

That’s where garden leave often comes up. You keep the employee on payroll through their notice period, but direct them not to attend work or perform duties.

So, is garden leave a bad thing for your business? Not necessarily - used well, it’s a powerful risk management tool. Used poorly, it can be costly and create legal headaches. In this guide, we’ll break down when garden leave works, when it doesn’t, and how to set it up properly in Australia.

What Is Garden Leave In Australia?

Garden leave (sometimes called “gardening leave”) is when an employee is still employed - and paid - during their notice period, but is directed to stay away from work, cease contact with clients and hand back devices and access.

It’s commonly used during resignations and terminations to protect the business while you transition responsibilities and lock down confidential information. We’ve written a deeper overview of Garden Leave in the Australian context if you want the essentials in one place.

Two key points for employers:

• You must continue paying the employee’s normal salary and benefits for the period of garden leave (unless their contract says otherwise for specific benefits).
• Garden leave isn’t automatic. It generally needs to be permitted by the employee’s contract or a clear, written agreement to avoid claims of repudiation or breach.

When Can You Use Garden Leave (And When Shouldn’t You)?

Garden leave makes the most sense when the role touches customers, strategy, pricing, source code, IP or other sensitive information - or if the employee is moving to a competitor.

Situations where it’s commonly used:

• Senior or client-facing staff who’ve resigned and are joining a competitor.
• Roles with access to critical systems, trade secrets or roadmaps where you need time to rotate passwords, brief the team and reassign responsibilities.
• Where you want the notice period to run while limiting disruption and risk.

Situations where it’s usually not a good fit:

• Short notice periods for junior roles with low risk - paying someone to sit out may not make sense.
• Where you don’t have a contractual right to place someone on garden leave (forcing it can backfire).
• Where there are serious misconduct concerns - in that case, consider suspending an employee pending investigation instead of garden leave.

Also think about alternatives. If you don’t need the person available during notice, and your contract allows it, you may prefer Payment In Lieu Of Notice to end employment quickly and cleanly.

Is Garden Leave A Bad Thing For Your Business?

Garden leave isn’t “good” or “bad” in itself - it’s about fit and execution. Here’s how it tends to play out for employers.

Potential Advantages

• Protect clients and IP: You reduce the risk of client poaching, data copying or last‑minute changes that hurt the business.
• Orderly handover: You get breathing room to move files, reassign work and secure systems without disruption.
• Supports restraints: Time spent on garden leave can make post-employment restraints easier to manage in practice, and the employee remains under their ongoing duties of fidelity and confidentiality.
• Cool-off period: It can lower the temperature where there’s tension, and avoid gossip or destabilisation in the team.

Potential Drawbacks

• Cost: You’re paying a salary for limited or no productivity - this stings more on long notice periods.
• Enforceability risks: If you don’t have a clear contractual right to direct garden leave, you risk a dispute or claims you’ve breached the contract.
• Restraint interactions: An overly long garden leave plus a lengthy non‑compete may be harder to justify as “reasonable” if ever challenged.
• Morale and optics: If not handled sensitively, garden leave can spook a team or feel punitive, especially in smaller businesses.

Bottom line: garden leave can be a smart move when there’s genuine risk and you’ve set it up correctly. It’s less attractive where risk is low or documentation isn’t in order.

How To Put Garden Leave On Solid Legal Footing

A little preparation goes a long way. If you want garden leave available as an option, build it into your employment framework now - not on the day someone resigns.

1) Bake It Into Your Contracts

Include a specific garden leave clause in each Employment Contract that allows you to:

• Direct the employee not to attend the workplace or perform duties during notice.
• Restrict client contact and require the return of property and credentials.
• Keep them available on reasonable notice to answer questions or assist transition.
• Confirm salary and benefits continue to accrue and are paid during garden leave.

Tailor the clause to the seniority and risk profile of the role. For senior or sensitive roles, you might also include longer notice periods.

2) Strengthen Confidentiality And Restraints

Garden leave works best alongside tight confidentiality provisions and reasonable restraints. Consider a well‑drafted Non-Compete Agreement or non‑solicit clauses (as part of the employment contract), and use an NDA with contractors or third parties who might access your information.

Restraints must be reasonable in scope, geography and duration. If in doubt, get advice before relying on them.

3) Set Clear Policies And Playbooks

Implement a practical process for garden leave so you’re not scrambling:

• Immediate access changes: email, CRM, code repositories, shared drives.
• Return of property: laptop, keys, ID cards, files, IP in progress.
• Client and team messaging: who says what, and when.
• Handover templates: projects, passwords, deal notes, pipeline status.

Many employers capture these steps through a suite of Employee Termination Documents and internal process checklists so every exit is consistent and low risk.

4) Choose The Right Path: Garden Leave vs Alternatives

Use the tool that matches the situation:

• Garden leave: Best for managing competitive risk during a standard resignation.
• Suspension: If there are allegations that need testing, consider suspending pending investigation on pay while you investigate.
• Pay in lieu: Where risk is lower and speed matters, Payment In Lieu Of Notice can end employment immediately and avoid a drawn‑out notice period.

How Long Should Garden Leave Be, And What Are The Rules?

There’s no one-size rule in Australia, but “reasonable” is the guiding principle. For most roles, garden leave aligns with the contractual notice period.

Here are common employer questions, answered simply.

How Long Is Reasonable?

It generally mirrors the notice period in the contract. For senior executives with three months’ notice, three months’ garden leave is typical. For junior roles with two to four weeks’ notice, longer stints rarely make commercial sense.

Can Employees Work Elsewhere During Garden Leave?

Usually not. While they remain employed, they’re typically required to be available and must not work for a competitor or start a new role without your consent. This is backed by the employment contract and general duties of fidelity.

Do You Need To Keep Paying Bonuses Or Commission?

Check the contract. Fixed salary and statutory entitlements continue. Eligibility for discretionary bonuses or commission often depends on the scheme rules and whether performance conditions are met - clarity in the contract avoids disputes.

Do Leave And Service Continue To Accrue?

Yes, because the employment continues during garden leave, service generally continues to accrue for entitlements such as annual leave and long service leave, subject to any award or agreement.

What If Misconduct Is Alleged?

If there are live allegations, garden leave may not be the right tool. Consider formal suspension while you investigate and follow a fair process (show cause, response, findings). A consistent process and the right documents help here.

Implementing Garden Leave Step-By-Step

When you decide to place someone on garden leave, keep the steps clear and respectful.

1. Check the contract first. Confirm your right to direct garden leave and any notice, benefit and restraint terms that apply.
2. Issue a clear letter. Confirm the garden leave direction in writing: dates, pay, duties suspended, availability expectations, contact restrictions, return of property and what happens next. If appropriate, coordinate with your Employee Termination Documents.
3. Secure systems and property. Disable unnecessary access immediately. Get devices and files back promptly. Document the chain of custody for sensitive assets.
4. Coordinate communications. Tell clients who their new contact is and reassure the team. Keep messaging factual and respectful.
5. Manage the transition. Use the period to hand over projects, rotate passwords and redistribute work. Avoid asking the employee to perform normal duties unless the contract allows limited tasks.
6. Close out cleanly. On the final day, reconcile pay and entitlements, confirm ongoing obligations (confidentiality, restraint) and consider a deed of release where appropriate.

Common Pitfalls (And How To Avoid Them)

• No contractual right: If the contract is silent, forcing garden leave can trigger disputes. Build it into the Employment Contract upfront.
• Unclear directions: Vague or verbal directions cause confusion. Always put garden leave terms in a short, clear letter.
• Overreach on restraints: Pair garden leave with reasonable restraints only. Excessive duration or scope can be harder to enforce than a proportionate, tailored clause.
• Access gaps: Leaving systems open for “just a few days” is where most data leaks happen. Lock down access first, then worry about the admin.
• Inconsistent treatment: Have a simple playbook so exits aren’t ad hoc. Templates, checklists and a standard NDA for third parties reduce risk.

Garden Leave Vs Restraint Of Trade: How Do They Fit Together?

Think of garden leave as protecting your business while the employment still exists, and restraints as protecting it after employment ends.

During garden leave, the employee remains bound by contractual duties and the duty of fidelity. Once employment ends, reasonable restraints (non‑compete, non‑solicit, non‑deal) can continue that protection for a limited, justified period.

To make this work, ensure your restraint and confidentiality clauses are drafted for your industry and role. A well‑calibrated Non-Compete Agreement can sit within the employment contract and reduce the need for lengthy garden leave in future departures.

Key Takeaways

• Garden leave isn’t inherently “bad” - it’s a useful tool to protect clients, data and stability when someone exits, provided it’s done by the book.
• Put the right to direct garden leave in the Employment Contract, and pair it with strong confidentiality and reasonable restraint clauses.
• Use garden leave for genuine risk scenarios; for misconduct allegations, consider suspension pending investigation, and for low‑risk exits, consider Payment In Lieu Of Notice.
• Keep your process consistent: written directions, access lock‑down, property return, client/team messaging and a clean close‑out with the right Employee Termination Documents.
• Restraints and garden leave should be reasonable and tailored. The stronger your documentation and playbook, the less disruption and legal risk you’ll face.

If you’d like a consultation on planning or implementing garden leave for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.