What is Garden Leave and When to Use It?

If you manage a team or you’re leaving your own job, you might have heard the term garden leave. But what does garden leave mean? Is gardening leave different? And how do these concepts play out in Australia, including under Fair Work regulations?

Garden leave can be an important tool for employers and employees alike, but it comes with rules and implications you’ll want to understand fully. In this guide, we’ll walk you through the garden leave meaning, why it’s called gardening leave, how it works in Australia, common legal issues, and the best practices for adding or using garden leave in your business.

Keep reading and you’ll learn when to consider garden leave in your contracts, what to watch out for to stay compliant with Australian law, and how to get it right so your business and your team are protected.

What Does Garden Leave Mean?

Garden leave (sometimes known as "gardening leave" or "gardeners leave") is a period during which an employee who has resigned - or whose employment is ending - continues to be paid and remain officially employed, but does not attend the workplace or perform their usual duties.

During garden leave, the employee typically stays at home (hence the gardening reference), and is usually restricted from starting new employment, working for competitors, or using sensitive business information. The intent is to keep the employee "out of the business" but still under contract, while protecting the company’s commercial interests.

In simple terms, it's a way for businesses to manage the transition period after an employee - often one with access to confidential knowledge or client relationships - serves their notice, but before their formal employment ends.

Why Is It Called Gardening Leave?

The name comes from old UK business slang: employees placed on garden leave were told to go home (with pay) instead of coming to work, often “free” to spend time gardening or otherwise keeping busy away from the company. While there’s no actual gardening required, the colloquialism stuck - and it’s now a standard business phrase across Australia.

What Is Garden Leave in Australia?

Garden leave is recognised in Australian employment law, though it’s not specifically defined in the Fair Work Act 2009. Instead, its use depends on what’s written in the employment contract, and how this aligns with common law and Fair Work principles.

In practice, Australian businesses use garden leave for senior executives, key salespeople, or staff with access to trade secrets. It’s a way to distance a departing employee from sensitive matters (like clients, business strategy, or intellectual property) for a set period - while still paying them their normal wage, and ensuring their contractual duties (like confidentiality and restraints of trade) remain in force.

The idea is to safeguard businesses from risks, while treating employees fairly. Done poorly, though, garden leave clauses can expose you to legal disputes, so it pays to get advice or use solid employment contract templates from the outset.

Is Gardening Leave the Same as Garden Leave?

Yes - "gardening leave”, “garden leave”, and less commonly “gardeners leave” all describe the same arrangement, with the terms used interchangeably in Australia and the UK.

How Does Garden Leave Work?

Here’s how a typical garden leave scenario might play out:

• Employee gives notice: A senior employee notifies your business they’re leaving for a new role (possibly with a competitor).
• Employer activates garden leave: Under the employment contract, you direct the employee not to come to work or perform their regular duties during the notice period (e.g., 4 weeks, 1 month, or as specified).
• During garden leave: The employee:
  • Remains employed (still on payroll, accruing leave, entitled to super, etc.)
  • Can be called on for specific tasks, though usually is not active in daily operations
  • Cannot work elsewhere or join a competitor (enforced via contract)
  • Must comply with all duties (confidentiality, non-solicit, code of conduct)
• End of garden leave: Once the period expires, their employment ends completely and post-employment restraints (eg. non-compete, non-poach) may start.

The arrangement must be included as an express clause in the employment contract. Without it, you generally can’t enforce “garden leave” - you risk a constructive dismissal claim or breach of contract.

Why Do Businesses Use Garden Leave?

• Protection of sensitive information: A departing employee may know confidential client or strategy details - keeping them out of day-to-day business reduces risks of information leakage.
• Managing handovers: Limits disruption while giving the business time to transfer client relationships or knowledge to others inside your team.
• Enforcing restraints: Maintains control over an employee’s activities during the notice period, strengthening later enforcement of restraint of trade clauses.
• Fairness for both sides: Employees still receive pay, accrue leave, and are treated as employed (important for their legal protection as well).

When Should You Use Garden Leave?

Garden leave isn’t for every business or employee. It’s most often used for roles where immediate departure could harm the business - think directors, managers, salespeople, or tech staff with access to strategic info.

Ask yourself:

• Does this employee have access to sensitive clients, data or plans?
• Is there a risk of moving to a direct competitor?
• Would an immediate exit hurt our team, clients, or future plans?
• Are we prepared to cover the work if they are absent before fully leaving?

If “yes”, garden leave might be appropriate - especially with a signed clause in your contracts. Always weigh the business benefits versus the cost of paying an employee who is not actively contributing during this period.

What Laws Apply to Garden Leave in Australia?

There’s no dedicated Australian statute for garden leave, but key rules and risks come from:

• Employment Contract: Any garden leave arrangement must be clearly stated in the contract to be enforceable. It should spell out when you can direct leave, the notice period, and the employee’s obligations during the period.
• Fair Work Act 2009 (Cth): The overarching rules for minimum entitlements, notice periods, and workplace rights. You must continue all National Employment Standards (NES) entitlements during garden leave (including leave accrual, salary, and superannuation as usual).
• Common Law and Constructive Dismissal: Taking someone off work without pay, or varying their duties (if not in the contract), may amount to constructive dismissal - effectively terminating them early and opening you to a claim.
• Modern Awards and Enterprise Agreements: Always check if additional requirements for notice or termination apply for award-covered employees or where EBAs are used.

For a detailed look at legal compliance for employees in Australia, see our explainer on employment obligations and Fair Work Act basics.

Is Garden Leave Legal Under Fair Work Australia?

Yes - if it is included as a valid, clear term of employment and respects all minimum entitlements, it is generally legal. You cannot force an employee onto unpaid leave or breach other minimum conditions set out by Fair Work Australia.

Garden leave is not a loophole or a means to sidestep legal rights. Any clause must be transparent and agreed to by both parties at the start of employment or through a contract variation.

What Should a Garden Leave Clause Include?

If you want to be able to use garden leave for senior or key staff, your standard employment contracts should include a specific clause. This protects both your business and your employees.

A strong garden leave clause should cover:

• That you may direct the employee not to attend work (or perform normal duties) during all or part of their notice period
• The employee remains employed on normal pay, retaining all rights and obligations
• The employee may be excluded from workplace systems, files, or client contact at your discretion
• Clear expectations around using confidential information, talking to clients or suppliers, or commencing work elsewhere
• That the period counts towards employment for service calculations (e.g., redundancy or long service leave accrual)

It’s best to have a qualified employment lawyer review or draft your contract, ensuring it’s fair, compliant, and enforceable.

Sample Garden Leave Clause (Summary)

A basic example might state: “The employer may, at its discretion, direct the employee to not attend the workplace or perform duties during all or any part of their notice period. The employee will remain employed and be paid their normal salary and benefits during this period, and must remain available for reasonable directions by the employer.”

How Long Can Garden Leave Last?

The length of garden leave is typically set to match the notice period in the contract - often two to four weeks, but sometimes several months for executives or highly sensitive roles.

Longer garden leave must be reasonable and justifiable, or you risk the clause being characterized as an unreasonable restraint of trade (which may be unenforceable in court). Always match the length to the genuine business risk and ensure you continue paying the employee in full.

What Are the Risks of Garden Leave?

• Breach of Contract: If you direct garden leave without the right clause in place, the employee could claim breach of contract or constructive dismissal.
• Enforceability Issues: Overly broad or lengthy garden leave arrangements can be challenged (especially if they prevent someone from working for too long).
• Disputes Over Duties: The employee remains technically available for work - so be clear about what duties, if any, they are expected to perform during the period.
• Interaction With Post-Employment Restraints: Garden leave counts as 'employment', so restraint of trade clauses (e.g. non-compete periods) usually start after the notice/garden leave ends, not during.

For extra protection, combine garden leave with carefully drafted non-compete agreements and conflict of interest policies.

Key Legal Requirements for Garden Leave

Before implementing garden leave in your Australian business, ensure you follow these requirements:

• Add a garden leave clause to all applicable employment contracts and get them signed at the start of employment.
• Keep the duration reasonable and linked to legitimate business needs.
• Continue to pay all wages, superannuation, and benefits as normal.
• Maintain all Fair Work entitlements (e.g., to leave accrual, right to lodge disputes).
• Don’t use garden leave for disciplinary purposes - it's a tool for managing exits, not punishment.

Document Checklist for Employers Using Garden Leave

If you’re considering or implementing garden leave, make sure your suite of employment documentation is robust:

• Employment Contract: With an express garden leave clause (and set notice period).
• Non-Compete/Restraint of Trade Clauses: Define what the employee can and can’t do during and after employment.
• Confidentiality Agreement: Protects sensitive business information before and after the employee leaves.
• Termination Letter or Notice: Clearly states the employee is on garden leave, with confirmation of pay and benefits.
• Exit Process Documents: This might include a checklist for return of property, handover of business accounts, and formal reminders of post-employment obligations.

You can learn more about these types of documents in our comprehensive guide to employment contracts and in our discussion of key legal documents for businesses.

Garden Leave vs. Payment in Lieu of Notice

It’s important not to confuse garden leave with payment in lieu of notice (“PILON”). In a payment in lieu arrangement, employment ends immediately and the employee is paid out for the notice period in a lump sum - no ongoing employment relationship remains. With garden leave, employment continues for the notice period even if the employee is not actively working.

Each approach has pros and cons, so speak with a workplace lawyer before deciding which is best for your company and situation.

Key Takeaways

• Garden leave means directing an employee to stay away from work during their notice period, while still being paid and technically employed.
• It’s commonly used in Australia for senior or sensitive roles to protect business interests and manage a smooth transition.
• To use garden leave effectively, you need a clear contract clause, ongoing payment of all entitlements, and strict compliance with Fair Work obligations.
• Garden leave is not a substitute for payment in lieu of notice - employment remains active until the end of the leave period.
• Combining garden leave with strong confidentiality and post-employment restraint clauses helps protect your business as employees transition out.
• Get advice before using garden leave or updating employment contracts to avoid legal risk and ensure enforceability.

If you’d like a consultation on implementing garden leave in your employment contracts or need help navigating your employment law obligations, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.