Garden Leave Clause
(Employment Agreement)

Summary

This garden leave clause is for an employment agreement providing that the employee will remain employed for a specified period prior to an anticipated termination date but may no longer be required to provide services to the employer. It contains practical guidance, drafting notes, and alternate and optional clauses. Garden leave provisions can provide an incentive that helps keep key employees from immediately taking up employment with a competitor after leaving a company. They are often used in this way to bolster or supplement more traditional restrictive covenants and covenants not to compete. Although somewhat rare in the United States, they are becoming more common for agreements with employees of special importance to an employer due to, for example, their expertise, their client or customer relationships, or access to highly confidential company information. Garden leave provisions are highly specific to the surrounding circumstances and their contents and scope will vary greatly depending on the terms that are of most concern to the parties. This template is a true garden leave provision that provides for continued employment through the garden leave period. Some agreements contain provisions designated as "garden leave" although they merely provide for a payment of all or a portion of salary over a designated period following termination, usually as additional compensation for the employee's restrictive covenants. Note that this template assumes the underlying agreement contains common employment agreement provisions, including good-reason and for-cause termination provisions, and uses the following as defined terms: "Agreement," "Company," "Executive," "Good Reason," "Cause," "Term of Employment," and "Change in Control." For a full listing of key content covering restrictive covenant considerations, see Restrictive Covenants Resource Kit. For a full listing of key content covering executive employee agreement considerations, see Executive Employment Agreement Resource Kit. For examples of garden leave provisions in publicly filed executive employment agreements, you can use a Keyword search for "garden leave" in the Market Standards–Employment Agreements searchable database from Practical Guidance. One example is MFA Financial, Inc., Section 5(f). Note that some agreements (e.g., Allovir, Inc., Section 5(c)) merely use a term such as "garden leave payment" to establish an alternative source of consideration for enforcing post-employment noncompete clauses but do not involve continued employment during the relevant period. For more information on Market Standards–Employment Agreements, click here. For more information on garden leave, see Garden Leave Provisions: Negotiation, Drafting, and Legal Issues. For general information on non-competes and restrictive covenants, see the Restrictive Covenants Resource Kit. For more information on executive employment agreements, see the Executive Employment Agreement Resource Kit.