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Placing employees on garden leave

Employers commonly use one of two options when terminating an employee – The first is termination by notice, where the employee serves out their notice period, while the second is paying the employee in lieu of notice – An alternative to these methods is to place the employee on garden leave. An employee who is put on garden leave is kept on the payroll but is instructed not to present themselves for work after notice of termination has been given.

As an employer, the advantages of placing an employee on garden leave are twofold. Firstly, a potentially unproductive or disruptive employee is kept out of the workplace. Secondly, the employee is prevented from commencing employment with a rival or setting up a business in competition until the expiration of the notice period. This is the major advantage of placing an employee on garden leave instead of making a payment in lieu of notice.

Generally an employer may place an employee on garden leave, unless a Court finds that the employer has a duty to provide the employee with work during this time period.

On the whole, Courts have been reluctant to find that an employer has an obligation to provide work for an employee. However, such a duty may be established in particular circumstances.

For example, the duty to provide work has been found in jobs where remuneration is based heavily on incentives (e.g. commissions or bonuses), jobs where the employee needs to be provided with suitable work in order to acquire skills (e.g. an apprenticeship) or maintain skills (e.g. a surgeon or professional sportsperson) and jobs where the employee needs work to enhance their public notoriety and reputation (e.g. a professional actor).

A recent decision by the Western Australian Industrial Relations Commission (WAIRC) reaffirmed that employers are not under any obligation to provide work where the employment contract does not fit into one of the above categories.

The decision involved an employee, who was a sales and marketing manager. The employee argued that a directive from her employer that all sales and marketing activities would cease forced her to resign, as she no longer had any work to do. The employee contended that the employer’s actions amounted to an intention to no longer employ the employee, effectively terminating her employment.

The WAIRC held that there was no express or implied contractual duty on the employer to provide work in this situation, and consequently rejected the employee’s claim that the employment contract was breached.

In spite of this decision, employers need to remain wary when placing employees on garden leave. Although the position taken by the WAIRC reinforces a long-standing traditional approach to the employer’s duty to provide work, judicial comments in another recent case suggest that there is significant support for a more liberal and widespread view of this duty.

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