Garden leave can be a really useful tool for Australian employers - especially when a senior employee resigns, you’re managing a sensitive exit, or you need to protect customer relationships and confidential information during a notice period.
But garden leave isn’t as simple as telling someone “stay home and don’t work” (even if you keep paying them). If you don’t handle it carefully, you can create avoidable disputes about pay, duties, access to emails, restraints, or even whether you’ve breached the employment contract.
In this guide, we’ll walk you through what garden leave is, when it makes sense, how to use it lawfully, and what to include in your contracts and processes so you can protect your business while treating your employees fairly.
Note: garden leave strategies should always align with your employment contracts, workplace policies, and the particular circumstances of the exit.
What Is Garden Leave (And When Should You Use It)?
Garden leave is when an employee is directed not to attend the workplace (and usually not to perform work) for some or all of their notice period, while they remain employed and continue to be paid.
In plain terms, the employment relationship continues - but the employee is “on the books” and “on payroll” while they are away from the business.
Why Employers Use Garden Leave
Garden leave is usually about risk management. Common reasons include:
- Protecting confidential information (pricing, strategy, tender details, product roadmaps, client data).
- Protecting customer and supplier relationships during a sensitive transition.
- Maintaining stability in your team if there’s a risk the employee could influence staff to leave.
- Reducing disruption where the employee’s day-to-day work is no longer appropriate once they’ve resigned (or once termination has been notified).
- Managing competing interests if the employee is heading to a competitor or starting a competing business.
Common Scenarios Where Garden Leave Makes Sense
You’re more likely to consider garden leave when the employee:
- is in a senior role (sales lead, manager, executive)
- has access to sensitive commercial information
- has key client relationships
- has announced a move to a competitor
- is leaving during a high-risk project or deal
Garden leave can also be relevant in workplace investigations, but that tends to overlap with different legal considerations around standing down or suspension. If the reason for removing an employee from the workplace is disciplinary or investigation-related, you should be careful not to treat “garden leave” as a blanket solution. (In those cases, processes like suspending an employee pending investigation may be more relevant.)
Is Garden Leave Actually Legal In Australia?
Garden leave isn’t “illegal” in Australia, but your ability to direct an employee onto garden leave usually depends on:
- the terms of the employment contract (including any garden leave clause)
- any applicable modern award or enterprise agreement
- general employment law principles (including whether a direction is lawful and reasonable)
As a general rule, you’re on much safer ground if your Employment Contract clearly allows you to place an employee on garden leave (and deals with things like duties, access to systems, and pay).
Garden Leave Vs Payment In Lieu Of Notice: What’s The Difference?
Garden leave is often confused with “paying out notice,” but they are not the same thing - and they can lead to very different outcomes.
Garden Leave (Employee Stays Employed)
With garden leave:
- the employee remains employed until the notice period ends
- you keep paying wages (and usually superannuation, leave accruals, and other entitlements that continue during employment)
- the employee must generally keep complying with obligations like confidentiality and following lawful directions
- the employee typically cannot start working elsewhere during the notice period (depending on the contract and any restraints)
Payment In Lieu Of Notice (Employment Ends Earlier)
Payment in lieu of notice is where you end the employment immediately (or on a shorter timeframe) and pay the employee what they would have earned during the notice period.
This can be useful when you want a clean break, but it also means the employment relationship ends earlier - which can affect restraints, duties, and how long you can rely on certain contractual obligations.
If you’re comparing your options, it’s worth reviewing how payment in lieu of notice operates and what it can mean for final pay and entitlements.
Which Option Is Better?
It depends on what you’re trying to achieve.
- If your key priority is keeping the employee “bound” by employment obligations for the full notice period (without workplace access), garden leave can make sense.
- If your key priority is ending the relationship quickly, payment in lieu may be cleaner.
In some cases, employers use a combination - for example, part garden leave and part payment in lieu - but you should do this carefully and consistently with the contract and any workplace instrument.
Can You Put An Employee On Garden Leave Without A Clause?
This is where things often get tricky.
In many cases, the safest and most practical approach is to include a garden leave clause upfront in your employment contracts. Without one, your ability to direct garden leave may depend on whether the direction is lawful and reasonable in the circumstances - and that can be contested.
Why The Contract Matters
Employment is contractual. That means your rights and the employee’s rights largely come from the contract terms (plus minimum legal standards like the Fair Work Act, awards, and enterprise agreements).
If your contract doesn’t mention garden leave, an employee may argue:
- you can’t unilaterally remove their ability to work (especially if their role involves professional reputation or maintaining skills)
- you’re changing their duties or role without agreement
- you’re effectively penalising them for resigning
That doesn’t mean garden leave is impossible without a clause - but it becomes more fact-dependent, and risk increases.
When Garden Leave Directions Are More Likely To Be “Reasonable”
A direction to stay away from work is more likely to be seen as reasonable when you can point to a legitimate business interest, such as:
- a genuine confidentiality risk
- serious client relationship sensitivity
- a clear conflict of interest
- workplace safety or team stability concerns
You’ll also want to ensure the employee continues receiving their normal pay and benefits, because garden leave generally isn’t meant to be punitive.
Notice Periods Still Matter
Garden leave usually sits inside the notice period (the period between resignation/termination notice and the employment end date). If you’re unsure what notice period applies, check the contract, any applicable award, and common minimum standards. It’s also helpful to understand typical resignation notice periods so you’re not accidentally applying the wrong timeframe.
How To Implement Garden Leave Properly (Step-By-Step)
When you use garden leave well, it feels structured, calm, and defensible. When you use it poorly, it can create confusion, frustration, and legal risk.
Here’s a practical process you can follow.
1. Review The Employment Contract, Award Or Enterprise Agreement
Start with the paperwork:
- Does the contract include a garden leave clause?
- Is there a power to direct the employee not to attend work?
- Is there a power to reassign duties during notice?
- Does it address pay, benefits, and access to systems?
If your contract is silent, you’ll need to be cautious and think through whether the direction is lawful and reasonable in your circumstances.
2. Confirm The Notice Period And End Date
Be clear about dates. Confirm:
- the resignation/termination notice date
- the employee’s final date of employment
- whether any leave will be taken during the notice period
Having clarity here helps prevent disputes about final pay, entitlements, and whether the employee was still employed when certain conduct occurred.
3. Give A Clear Written Direction
You should generally confirm garden leave in writing. Your letter/email should usually cover:
- that the employee is being placed on garden leave from a specific date
- the expected end date (often the end of the notice period)
- that the employee remains employed and will continue to be paid as normal
- whether they are required to be contactable during business hours
- instructions on returning company property and protecting confidential information
- restrictions on accessing systems, attending work premises, or contacting clients (where appropriate)
A clear written direction also helps you demonstrate consistency and reduce misunderstandings.
4. Manage Access: Systems, Emails, Devices, And Client Contact
Garden leave often goes hand-in-hand with tightening access. Common steps include:
- disabling access to internal systems (CRM, finance platforms, shared drives)
- resetting passwords and access permissions
- ensuring customer data is secure
- setting email forwarding rules (with care)
- arranging return of devices, keys, cards, and documents
Be mindful that monitoring or accessing work communications can raise privacy and surveillance issues. If you use workplace monitoring or surveillance, it helps to align your process with your policies and relevant laws, including obligations discussed in employer access to employee emails.
5. Confirm What The Employee Can And Can’t Do During Garden Leave
During garden leave, you’ll often want to reinforce that the employee must continue to comply with:
- confidentiality obligations
- return of property requirements
- directions not to represent the business externally
- reasonable restrictions around contacting clients, suppliers, or team members
This is also where restraint clauses may become important, depending on the employee’s seniority and the nature of your business.
Garden Leave, Restraints And Secondary Employment: What Employers Need To Watch
Garden leave is often used alongside restraints (like non-compete and non-solicitation obligations). But it’s important to understand what garden leave can and can’t do on its own.
Garden Leave Does Not Automatically Create A Non-Compete
Garden leave is not a substitute for a properly drafted restraint clause.
Putting an employee on garden leave may reduce the immediate risk of them accessing your confidential information or speaking to clients while they’re still employed, but it won’t necessarily stop them from competing after the employment ends.
If you want enforceable restraint protections, they typically need to be set out in the contract, drafted in a way that’s reasonable and tailored to your legitimate business interests. This is where documents like a Non-Compete Agreement (or well-drafted restraint clauses within an employment contract) can be relevant.
Non-Solicitation And Client Protection
For many businesses, a non-solicitation clause (no approaching clients, suppliers, or staff for a period) is more realistic than a broad non-compete.
Garden leave can help create a buffer period where:
- you transition key relationships to other team members
- you reduce reliance on the departing employee
- clients become comfortable with the new point of contact
Can The Employee Work Another Job During Garden Leave?
Often, the answer is “not without permission,” but it depends on the contract terms and whether there’s a conflict of interest.
Because the employee is still employed during garden leave, secondary work can raise issues like:
- conflicts of interest
- misuse of confidential information
- breach of exclusivity clauses
- fitness for duty (if they were meant to be contactable)
If you suspect the employee is working for a competitor during garden leave, get advice early before taking steps - particularly if you’re considering disciplinary action or withholding amounts from final pay.
What Should A Garden Leave Clause Include?
If you want garden leave to be easy to implement and less likely to be challenged, it helps to build it into your employment contracts from the start.
Even if you already have contracts in place, it may be worth reviewing and updating them (particularly for senior employees or customer-facing roles) so your business has the right protection as it grows.
Key Terms To Consider
A garden leave clause commonly covers:
- Your right to direct garden leave during all or part of the notice period.
- Pay and entitlements (confirming wages continue and what happens to allowances/benefits).
- Duties during garden leave (for example, whether the employee must remain available, assist with handover, or be contactable).
- Workplace attendance (confirming they must not attend the workplace unless requested).
- Restrictions (reasonable directions about client contact, staff contact, representing the business, and system access).
- Return of company property and protection of confidential information.
Make Sure It Matches The Rest Of Your Contract
Your garden leave clause should also align with other terms, including:
- confidentiality clauses
- intellectual property clauses
- restraint of trade clauses
- notice provisions
- termination provisions
If these clauses contradict each other, it can weaken your position when you most need clarity.
Don’t Forget Policies And Practical Process
Contracts are only part of the picture. You’ll also want internal processes that support garden leave decisions, including:
- a consistent offboarding checklist
- IT and security steps for access removal
- client handover plans
- clear internal communication (so your team hears the right message)
Even a well-drafted clause can be undermined by an inconsistent process.
Key Takeaways
- Garden leave lets you keep an employee employed (and paid) during their notice period, while directing them not to attend work and limiting business risk.
- You’re usually in the strongest position to use garden leave when your Employment Contract includes a clear garden leave clause and related protections.
- Garden leave is different from payment in lieu of notice - garden leave keeps the employment relationship alive, which can be helpful for confidentiality and transition management.
- Implement garden leave carefully: confirm notice periods, issue a clear written direction, manage access to systems, and document return of company property.
- Garden leave doesn’t automatically create a non-compete - if you need restraint protection, it should be properly drafted and reasonable for your business.
If you’d like help reviewing or updating your employment contracts, restraints, or offboarding processes (including garden leave letters), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
