Garden Leave Provisions in Employment Agreements

Thomson Reuters Practical Law: The Journal – Transactions & Business September/October 2017

Peter A. Steinmeyer and Lauri F. Rasnick, Members of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Chicago and New York offices, respectively, co-authored an article in Thomson Reuters Practical Law: The Journal – Transactions & Business, titled “Garden Leave Provisions in Employment Agreements.”

Following is an excerpt (see below to download the full article in PDF format):

In recent years, traditional non-compete agreements have faced increasing judicial scrutiny, with courts focusing on issues such as the adequacy of consideration, the propriety of non-competes for lower-level employees, and whether the restrictions of a non-compete are justified by a legitimate business interest or are merely a tool used to suppress competition. ...

Against this background, employers are seeking alternatives to traditional non-competes to protect their proprietary information and customer relationships. One alternative gaining traction is the use of garden leave provisions in employment agreements. These provisions extend the employment relationship for a period of time past the notice of an employee’s termination or resignation, during which the employee remains employed and continues to receive a salary (and sometimes benefits) and therefore cannot work elsewhere. ...

While garden leave provisions are not a panacea, they may serve as a helpful tool that employers can use to protect their legitimate business interests and prevent certain employees from immediately working for a competitor.