Garden leave

Garden leave | Daily Tribune

In a garden, pruning is an act of foresight. It curtails the excess to preserve vitality. In employment law, a garden leave serves the same function. It is a deliberate pause between employment and departure — one that ensures trade secrets remain intact even as the employment relationship nears its natural end.

While common in other jurisdictions, the concept of a garden leave remains relatively unfamiliar to many Filipino employers and employees. The term, which might conjure up images of leisurely gardening, in fact refers to a period during which an employee — one who has resigned or whose employment is about to end — is directed by the employer to stay away from work during the notice period while still receiving full pay and benefits.

This arrangement allows the employer to safeguard sensitive information, client relationships, and operational stability during the transition, while at the same time preserving the employee’s right to compensation.

As explained in McConnell Dowell Philippines Inc. v. Bernal (G.R. No. 224685, 10 November 2021) and Mejila v. Wrigley Philippines Inc., Panis et al. (G.R. No. 199469, 11 September 2019), the practice of directing an employee not to come to work during the notice period of resignation or termination is colloquially known as a “garden leave.”

The employee may be assigned limited duties, required to assist in the turnover of work, or simply be directed to be available during the notice period. In other cases, the employee is given no work and instructed to have no contact with clients or continuing employees. During this period, the employee continues to receive his salary and contractual benefits as though still rendering services to the employer.

The Supreme Court explained that in the United Kingdom, where the concept first took root, a garden leave functions as an alternative to post-employment non-compete clauses. The employee remains technically employed but is instructed not to perform any work, figuratively allowing him to “stay home and tend the garden.”

Because the employment relationship subsists, the employee remains bound by the duty of loyalty and may not render services to a competitor or act in a way detrimental to the employer.

This mechanism balances the protection of business interests with continued employee compensation and has been widely recognized and upheld in both the United Kingdom and the United States.

The principle was tested in McConnell Dowell Philippines Inc. v. Bernal, where an employee was terminated due to redundancy. The notice of termination stated that although he remained an employee during the one-month notice period, he was no longer required to report for work.

The Court of Appeals initially ruled that the employer acted in bad faith because the employee’s identification card and access privileges were revoked and his work station cleared even before the termination took effect.

The Supreme Court reversed this ruling. It held that the employer’s directive not to report for work during the notice period was not an act of bad faith. The notice clearly informed the employee that he need not report for work but would continue to receive full pay and benefits during the period. His exclusion from the workplace, therefore, did not constitute arbitrary or malicious conduct.

Significantly, the Court recognized that placing an employee on garden leave — directing the employee not to work while maintaining full pay — is not prohibited under Philippine labor law.

Thus, like pruning a well-kept garden, a garden leave is preventive rather than punitive. It is an act of foresight designed to preserve trust, confidentiality and continuity. As the labor landscape evolves, a deeper understanding of this concept will help employers and employees alike handle transitions not with haste but with care — cultivating workplaces where endings are managed with the same prudence and respect that mark good beginnings.

For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.