Practices are, by definition, people-oriented businesses that provide clinical and retail services while maintaining personal relationships with patients. But while such personal relationships engender loyalty, they are a business weakness in that when an employee leaves, patients may be inclined to follow.
Likewise, when an employee departs they also ‘take’ with them information not only about patients, but also pricing and key suppliers. Fundamentally, a departing employee can cause a practice harm. One solution is a term in their contract known as gardening leave. This gives an employer the right to require the employee to work their notice period at home.
Alex Kleanthous, a consultant and employment solicitor in the dispute resolution and commercial litigation team of Gannons, knows from experience that ‘employers use these clauses to distance an employee from patients and colleagues to minimise the risk of poaching when the employee actually leaves.’ They are also used in conjunction with restrictive covenants.
Need for gardening leave clause
Clearly the risks are higher with key employees, and this is why Kleanthous says that gardening leave clauses are typically found in a senior employee’s or director’s employment contract. He says: ‘The clause entitles the employer, after notice has been given by either party, to require the employee to stay at home and not work or contact colleagues, clients and suppliers.’
Notably, Kleanthous says that gardening leave clauses are not just important for senior employees – it is also important where any employee has valuable and transferable relationships, practice managers and opticians being good examples.
Here he says: ‘Employers can use gardening leave to protect their relationships with clients before the employee leaves and to significantly mitigate the risk of data theft or misuse in the lead up to an employee leaving.’
Referring again to the use of restrictive covenants, they can, for example, prohibit working within a certain distance of the practice, or from soliciting patients, for a defined period.
However, he explains that while covenants ‘can be helpful, there are often issues of enforceability. But, if a departing manager is on gardening leave, they cannot work elsewhere, and this can be enforced if they try to break that obligation.’
Advantages of gardening leave clause
For Kleanthous, there are several key advantages of gardening leave which he outlines: the employee continues to owe all their contractual duties, including implied terms such as the duty of trust and confidence, to the employer; and it can allow for a useful handover period.
To this he adds: ‘A paid period of non-competition may be more palatable to an employee than an unpaid period.’
Disadvantages of gardening leave clause
It should also be said that there is no real disadvantage to having the clause in the contract – it will always be up to the employer whether to implement it. But if it is implemented, the flipside is that, as Kleanthous outlines: ‘The employer needs to continue to provide all contractual pay and benefits during the period of gardening leave.
However, the employer can expressly exclude the obligation to provide benefits in the employment contract and it is open to the employer to implement the gardening leave clause for part only of the notice period.’
It needs to be remembered that employees have a right to work. It is for this reason that Kleanthous comments that in the absence of the gardening leave clause, an employer might not legally be able to place an employee on gardening leave.
In fact, he says: ‘Isolating an employee or failing to provide them with work, without the express power, could be regarded as a breach of contract depending on the circumstances. This would entitle the employee to resign and claim constructive dismissal on account of the employer’s breach of contract.’
Worryingly for employers, this can enable the employee to avoid any restrictive covenants because of the breach of contract.
Gardening leave clauses combined with restrictive covenants
As noted earlier, gardening leave clauses are often used in tandem with restrictive covenants. And the reason is, to reiterate, simple – employees can acquire confidential information.
Kleanthous has seen employees tempted to use this information after their employment has terminated, either in business for themselves or to further the interests of their new employer who may be a competitor.
It is because of this that he says gardening leave may need to be combined with restrictive covenants applying post departure. Further, the lack of comprehensive protection in employment contracts can make it more difficult to sell the business.
Employee breaches gardening leave
With the landscape set out there is an obvious question. What happens if an employee refuses to comply with gardening leave? In answer Kleanthous says that clauses can be enforced with a court injunction, often preceded by a cease-and-desist letter.
But he details that this is an expensive solution. Even so, he adds: ‘A court is highly likely to enforce a contractual gardening leave clause whereas a restrictive covenant is usually much more arguable.’
Valuable information
It is a fact of life that employees do not stay in posts forever. Considering the value a practice places on both the information it holds and the relationships it has with patients, thought needs to be given to protecting its information on employee departure.