Garden Leave Archives

Garden Leave . . . Is Negotiable

Published on February 27th, 2018 by Alan L. Sklover

 
“Logic will get you from A to B.
Imagination will take you everywhere.”

– Albert Einstein

ACTUAL CASE HISTORIES: A “Garden Leave” obligation is a promise that you will remain on your job, after resigning, for 30, 60, 90 or more days prior to departing during which (a) you may be required to work in the office, (b) you may be told to remain at home “tending your garden,” (c) in either case, while you are subject to termination at any time, at the discretion of employer.

For perhaps 20 years I have seen “Garden Leave” provisions in offer letters, employment contracts, bonus agreements, retention agreements, and almost every other kind of workplace agreement. Many clients chafe at these restrictions, as they both delay their moving on to hopefully “greener pastures,” and frustrate the wishes and plans of their would-be next employers.

A few years ago I began to suggest to clients facing Garden Leave restrictions that they attempt to negotiate to reduce the duration of their Garden Leave’s restriction. Increasingly, clients who try to do so are meeting with success. All the time? No. But with increasing frequency? Yes.

I now suggest to every client who is planning to resign from a job, but facing a long Garden Leave restriction, that they attempt to reduce their Garden Leave period through negotiation. Why not? There’s little to lose and so much to gain.

LESSON TO LEARN: With few exceptions, everything in life – and that includes work life – is negotiable. And by negotiation, I mean motivating your manager or employer to view what your seek to be in their interests as well as your own.

The same first principle that governs any negotiation – that a person will likely pursue what that person perceives to be in his or her best interests – governs this negotiation, as well. If you can change the way a person perceives her or his own interests, then you can motivate her or him to do just what you want them to do. Some people say, “Oh, gee, that’s just Sales 101 . . . that is, if you buy a certain toothpaste, you will have a better social life. ” Well, what applies to toothpaste applies to Garden Leave provisions, too.

And there’s no downside to making any request, so long as you present it with “The Three R’s”: (1) Be Respectful. (2) Be Reasonable, and most importantly, (3) accompany your request with a compelling Rationale.

As I have many times said, “You can lead a horse to water, but you cannot make it drink . . . but if you put the right “salt” into its mouth, it will feel thirsty, and, on its own, it will look for a stream.” In the Garden Leave context, all you have to do is decide who is the right “horse,” and what is the right “salt.”

WHAT YOU CAN DO: When planning to resign, if you are subject to a Garden Leave obligation, you should consider requesting that its length be reduced. Here are some thoughts that might help you do so:
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“No Non-compete? No Stolen Secrets? You are Free.”

Published on August 26th, 2015 by Alan L. Sklover

Question: My husband was recently fired from his job. He never signed a non-compete or a non-solicitation agreement. We decided to start our own business in the same kind of business as his employer was in, because that is what my husband knows best. I own it; he does most of the work. No client list was ever taken or anything like that.

Since we started the business, we gained some of the clients of his former employer. Are we doing anything wrong or illegal? We have not heard from his former boss, but we are concerned that we will.

Teresa
Ogden, Utah

Answer: Dear Teresa: Simply put, and legally speaking, you seem to be “in the clear.”
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“Garden Leave’s Little Secret: It is Not Very Enforceable”

Published on May 16th, 2013 by Alan L Sklover

Here’s 18 Smart Steps to Guide You

“Complexity (at work) has opened a great divide between
those who have mastered its requirements and those who haven’t.” 

– Brink Lindsey, in his recent
  book, “Human Capitalism”

ACTUAL “CASE HISTORIES”: Carolyn contacted us when she was about to move from one employer to another. She sought our help going through her upcoming transition. Workplace transitions are our special area of experience and expertise. As we do for all of our clients, we asked Carolyn to send to our office all of her “workplace papers,” including offer letter, all agreements signed, employee handbook and benefit and equity plans and agreements, for review prior to our consultation. 

Our review of Carolyn’s written materials revealed one potential problem: a “Garden Leave” provision existed in her Stock Option Agreement. A “Garden Leave” provision says, in effect: 

“You must give at least 90 days written notice of resignation. During that 90-day period, we have the right to have you stay at home (and ‘tend your garden,’ so to speak) and have no contact with employees or customers. Of course, you cannot work elsewhere during that period. During that period we will pay your salary and provide benefits, but not accrued vacation, sick days or bonus. We have the right to shorten that period if we wish, and let you go sooner.” 

[Note that Garden Leave periods are commonly 30, 60, or 90 days, and sometimes even 120 or 180 days.]

Carolyn said that she was needed immediately by her next employer, and she was certain her next employer would not wait those 90 days for her to begin. From our point of view, having the freedom to work where and when you want to work is a valuable freedom, and should not be given up easily. We counseled Carolyn that, while she had signed an agreement, there was not very much her employer could do to her that should worry her all that much; if her next job was really important to her – and the right to take any next job in the future – she might decide to deliberately ignore the agreement, and then just deal with the “consequences” – if any. 

After discussing the matter with us and her next employer, Carolyn decided to make her move to her next employer, and to take the risks of doing so. As it turned out, they were not all that significant: (a) she had to forfeit about $22,000 worth of stock options, (b) she did incur some legal expense, and (c) she seemed to have “burned a bridge” that was, to her mind, not that valuable a bridge to begin with. Oh, yes: she had a few sleepless nights, too. 

In retrospect, Carolyn’s decision to ignore the Garden Leave agreement she had signed was a wise one. First, though she did receive a rather nasty letter from her employer’s General Counsel that threatened “legal action,” no such “legal action” ever took place. Second, though Carolyn did lose her unvested options, she was confident that the loss incurred would be more than made up by her anticipated increase in compensation from her future employer. Third, though the squabble with her employer did cause her to delay her start at her next employer by two weeks, that did not bother her next employer; Carolyn even enjoyed having some time off. 

Looking back, Carolyn shared our view that, with a few exceptions, Garden Leave is not very enforceable, and agreed that “The only thing you have to fear is fear itself.”

LESSON TO LEARN: In the past ten years or so, employers have begun to use a new technique to protect themselves when employees depart, called “Garden Leave.” First, it acts to deter employees from leaving at once because (a) it makes the next employer wait 30, 60, 90 or even 120 days for them to start, something many employers will not or cannot do, and (b) by keeping the employee bound to them – and out of communication with clients and colleagues – they make it very hard to take clients and colleagues with them. 

The idea behind Garden Leave is rather ingenious, some would say a bit evil, but in practical effect it is not iron-clad, that’s for sure. We have helped many of our clients navigate themselves around the difficulties imposed – or seemingly imposed – by Garden Leave provisions. 

Garden Leave provisions usually, but not always, provide that you will continue to receive salary and benefits, but not receive or accrue (a) vacation, (b) sick days, (c) bonus, (d) commissions, (e) equity vesting, or (f) other payments, benefits or perquisites.  

A Garden Leave agreement is a kind of contract. “So,” you might ask, “how can I just ignore it?” The answer is that, with a few exceptions, there is just nothing an employer can do to enforce it. Here’s the analysis: 

a. Sue for damages? What damages?” The law provides two basic ways to obtain a remedy for a “wrong” that was done. The first is what most people usually think of, and call a “lawsuit for damages.” That is, someone suing someone else for, say, $100,000. This is the first thing that most employers’ lawyers will threaten, almost always as mere “hot air.” 

It is quite rare for an employer to have actual financial damages that result from an employee’s departure. It is possible if, for example, the employee is an opera singer and the opera tickets have already been sold, or an investment banker whose absence is the direct cause of a deal not closing. But in the vast majority of employee departures, there are no direct causal damages. Without direct damages caused by the employee’s early departure, there is no legal basis for a lawsuit. 

Think of it this way: if your car ever-so-lightly bumped into your neighbor’s car’s bumper, and there was no dent or scratch caused by the light bump, and no passengers were injured, there is simply nothing to sue about or for. (That is why they are called “bumpers,” you know.) 

b. Injunction to be sought? To stop what? The second kind of remedy the law makes available to people who have been “wronged” is what lawyers call an “equitable” remedy, usually in the form of an “injunction” or sometimes called “injunctive relief.” This is not a lawsuit for money, but instead a lawsuit to ask a Judge to issue a Court Order demanding that someone stop doing something that is wrong. This is called an “injunction.”

If a labor union is striking in violation of law, a Court can Order the union – by issuing an injunction – to “stop the strike” and get back to work. Or, if a power plant is spewing forth toxic chemicals, a Court can Order the power plant to stop polluting the air, or even stop operating the power plant. But, if you are not working at your former employer, and not yet working for your new employer, what can the Court Order you to stop doing . . . watching TV? Playing golf? Spending time with your children? Hardly.

Sure, if you have transferred trade secrets or customer lists, or asked customers and colleagues to leave your former employer, those could be Ordered halted by a Court – maybe. But if you have not done those things, then there is nothing to “stop doing.” 

In case you are curious, a Court cannot issue a Court Order to force you to work. Ever since this country outlawed slavery, that is simply not an option. 

c. Threaten to sue your next employer? Possibly, but rarely more than a scare tactic. Your employer’s next attempt to “enforce” your Garden Leave agreement may well be by means of a threat – made to you and/or made to your next employer, if your present employer knows who that is – to sue your next employer for some vague offense, sometimes called “tortious interference.” This is almost always nothing but a baseless threat, without meaning or effect. While there is a kind of legal claim called “tortious interference,” it is not commonly accepted by Courts, and is even less commonly successful: 

First, there is nothing in the world wrong with an employer offering a job to an employed person; every employer does that at least once a week, if not daily; 

Second, almost every employee is what we call an “at will” employee, which employers are constantly reminding us means “Either the employer or the employee may end the employment relation at any time and for any legal reasons”;  

Third, even if your former employer claims the next employer knows of your Garden Leave agreement, just as noted above, it is almost always an agreement without any damages for breach;   

Fourth, if a lawsuit is begun by your former employer against your next employer, all the next employer has to do is simply end your employment relation to end any alleged “interference”; and 

Fifth, the truth is that, if anyone is “guilty” of tortious interference, by writing a letter threatening your future relation with a new employer it is more your former employer who is the one who should fear being sued, and not a future employer, who has every right to say to someone, “Would you like to work for us?”   

No one likes being threatened with a lawsuit, and no one likes being sued. It is the fear in the mind of your next employer that, if anything, can keep you out of work for the Garden Leave period, and thus must be addressed.

d. Make you forfeit past-earned monies? Yes, possibly. If you have deferred income, perhaps in the form of deferred bonuses, or unvested equity, such as unvested stock options, it is possible – though not necessarily the case – that the terms of your Garden Leave agreement or your bonus or equity “plan” provide that you will lose these monies if you (a) voluntarily resign, or (b) resign without honoring your Garden Leave agreement. 

This is a potential “cost” of leaving an employer, and should be looked into before considering a transition. It should be noted that, under some plans and agreements, you lose your deferred income and/or your unvested equity even if you are laid off, without cause. Check your plans; this may be important, or perhaps even inapplicable, to you. And, too, consider how much the loss is worth to you. 

Incidentally, there is a legal argument to be made that the employer, by establishing a forfeiture, has “set a price” on your ignoring your Garden Leave agreement, and thus cannot seek additional “damages” from you.  

e. Might they claim you were fired? Rare and overblown; One exception: Form U-5. Any time you leave a relation – be it friendship, dating, marriage or employment – you run the risk of your former “relation-mate” bad-mouthing you. In the employment context, this can take the form of your former employer giving you an undeserved bad reference. In this situation your former employer could claim that “This person was fired for bad conduct,” referring – dishonestly – to your not complying with your Garden Leave agreement.

With one major exception, experience shows that bad-mouthing by former employers is not as much a risk as most people fear it might be. One thing is for sure: you cannot stay in an unproductive or unhealthy relation based on the fear – which might not even be real – of your former “relation-mate” saying bad things about you. 

The one major exception is if you are a Registered Representative in the securities industry. In that case, when your employment terminates for any reason, your employer must, within 30 days of the termination, file a form called a Form U-5 explaining the reason(s) for your departure. It is not unheard of for a disgruntled employer to try to smear a former employee by filing a false, fraudulent and defamatory Form U-5. This possibility – however remote – is always to be taken into account and, as noted below, steps need to be taken to minimize the chances of this happening, and if it does, minimize the harm that might take place. 

WHAT YOU CAN DO: Garden Leave is certainly not something to fear, but rather something to navigate. However, as employment transitions go, it is a bit complicated, as it calls into play several different legal and negotiating concepts at the same time. 

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“Can I be on ‘Garden Leave’ and reemployed elsewhere at the same time?”

Published on March 3rd, 2012 by Alan Sklover

Question: I have resigned my job in Germany and I have been sent home to sit out my resignation period. I have 4 of the 6 months to go.

My new employers in the UK want me to start ASAP. That would mean double salary for at least 3 months. Are there any problems if I go ahead?

John
Germany

Answer: Dear John: I have very limited facts upon which to respond, but on the basis of what you’ve written, these are my thoughts:

1. What you describe – a long “resignation period” with pay – is usually called a “Garden Leave” provision. Since the dawn of humankind, employers have been upset whenever they have lost valuable employees, especially if those valuable employees leave to work for their competitors. To keep that from happening, employers have come up with many different ways to stop, discourage, or punish employees who consider doing that, and if they do that, to minimize the damage it might cause to their businesses.

A rather recent idea devised by employers is “Garden Leave,” which is a requirement that, if you leave your job, you must give the employer at least 6 months notice before you leave. During that time you typically are told to stay at home – and to “tend your Garden” – to do no work, but to just be available to answer questions. This requirement is usually in a written agreement you are required to sign, or must sign in order to receive benefits, including bonuses and stock options.

2. Garden Leave serves the needs of the employer: (a) to discourage prospective new employment, (b) to disrupt an employee’s relations with clients, and (c) to make any “secrets” known to the departing employer stale and valueless to others. So, by operation of a Garden Leave provision, the employee must sit home, collect pay and benefits, and the employer’s needs, mentioned above, are met. If an employee violates his or her Garden Leave agreement, that employee must bear the possible risks involved: a lawsuit, a letter being sent to the new employer demanding the employee be fired, loss of past-paid bonuses and stock options, and perhaps even having to pay the former employer’s legal costs.

3. It would not make sense for an employer to (a) give the employee continued salary and benefits, but (b) not have its own “needs” – mentioned above – fulfilled. While it is possible your employer would permit you to (a) have the “benefits” of a Garden Leave provision, including salary and benefits, but (b) not require you, in return, bear its “burdens,” I’ve never heard of an employer acting in this way against its own interests.

Additionally, if you were being paid simultaneously by both your former employer and your new employer – presumably a competitor – which one would you give your loyalty to? That would put you in something of a potential conflict of interest. Remember that “A person who wears one watch always knows what time it is; a person who wears two watches is never certain.”

4. If you are, indeed, in this Garden Leave dilemma, you have six possible steps to move forward. First, you could attempt to “work” for both employers simultaneously, which I do not at all recommend, for it is possibly characterized as dishonest to both. Second, you could ask your present employer if they would release you prematurely from your Garden Leave requirements, something that they might agree to, even if just to save themselves the cost of your continued salary and benefits. Third, you could assess the risks of “breaking” your Garden Leave “promise,” which might include, among others, (i) loss of unvested stock and stock options, (ii) repayment of bonuses previously paid to you, (iii) possible legal fees of your employer for taking you to court, and (iv) being fired by your new employer. Fourth, you could ask your new employer to pay the costs of defending you in a lawsuit and paying you for any other losses, which they might do if they view you to be sufficiently valuable to them. Fifth, you could tell your new employer that it will, indeed have to wait, until your Garden Leave has expired. Sixth, if they do not agree to do that in writing, your next step forward would be to seek an alternative new employer who is willing to wait until the Garden Leave expires.

5. Complicated?: Yes. Insurmountable?: No. Don’t be overwhelmed by what lies in front of you. Instead, consider it a “challenge” to overcome by careful navigation and negotiation. This is precisely the kind of situation that every employee needs to get comfortable with in their employment, and adroit in handling. It is my expectation that, with these thoughts in mind, you can do so quite well in “navigating around, on your own, or, if you need, the assistance of local legal counsel.

John, whatever your field of work may be, you will likely be faced with these kinds of challenges again. We hope we have been of assistance in this challenge, and you’ll return to our blogsite again if and when you are faced with other workplace challenges you may face in the future. And, if this has been valuable to you, we hope you will tell your friends, family and colleagues about our blogsite.

Thanks for writing in from Germany. Good luck in your “navigating” forward.

My Very Best,
Al Sklover 

P.S.: If you would like interactive and insightful assistance with your Garden Leave issues, and how to best deal with them, I am available for 30-minute, 60-minute, or 120-minute telephone consultations. If you would like a consultation, just [click here.]

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© 2012 Alan L. Sklover, All Rights Reserved.


Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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