Employers are often surprised to learn that, without a garden leave provision, they may not be entitled to exclude an employee from the office or restrict them from doing their normal job, even during the employee’s notice period.
Is there a right to work?
An employment contract is often looked at as simply the employee’s obligation to work and the employer’s obligation to pay. However, while there is no general right to work, in certain circumstances some employment contracts may include an implied promise by the employer to provide the employee with the opportunity to use their skills.
Whether this implied right to work arises for a particular employee will depend on the circumstances – in particular, the nature of the employee’s skills, how they are remunerated and whether they are required to work defined hours.
Use of skills
Where the employee has a skill that will benefit from being exercised or would atrophy from non-use, then the courts have been ready to impose a term that the employee has the right to exercise those skills. While this right does not require the employer to find the employee work where none exists – or to give that employee work to the exclusion of another person – it does preclude the employer from denying the employee the opportunity to exercise those skills by, for example, placing the employee on garden leave (at any rate, in the absence of a specific garden leave provision).
One might assume that there are very few professions where skills would genuinely atrophy from their short-term lack of use; a concert musician being an obvious example often cited by the courts. However, judicial comments have suggested that employees who have a professional skill (such an accountant) may have the right to work so as to allow them to exercise that skill. This proposition would also extend to cases where the employee’s career prospects would be advanced by the use of their skills, which would in turn allow them to develop and enhance their reputation in their profession. The usual example cited is a person employed as an actor, but clearly this too can have wider application.
Loss of opportunity to earn
More obviously, if the employee’s promised remuneration depends on the employer providing the opportunity to earn it, then the courts will readily imply an obligation to afford the employee the opportunity to work. Consequently, employees who derive a significant portion of their income from commissions – or who are entitled to performance based bonuses on meeting targets – may have to be allowed to work during their notice period (again, in the absence of a specific garden leave provision).
The courts have also suggested that specified work hours in the employment contract may impact on the right-to-work question. Where the employee is required to work specific hours in order to earn their remuneration, allowing the employee to draw that remuneration without working those hours is (arguably) inconsistent with the terms of the contract.
This argument has not received much judicial consideration, however. It seems to rest on the idea that if there are specified hours of work, then the employee is contractually obliged to work those hours for their pay. If so, that obligation is then owed by the employee to the employer, which the employer could choose to waive by placing the employee on garden leave. On that basis, the “specified hours” argument may not carry much weight if fully argued.
No garden leave provision
If a particular employee has a right to work, then placing them on garden leave may constitute constructive dismissal unless there is a specific garden leave provision in the employment contract.
If there is no such provision in the original contract, all is not lost, though. It is always possible to agree a garden leave provision with the employee at any time. This can even be done when the employee’s employment is terminated.
However, there are two downsides to trying to agree garden leave provisions late in the day. Firstly, the employee may simply not agree to the new term, even though they probably would have agreed to the same provision had it been included in the contract originally. Secondly, any such late addition of a garden leave clause will not be supported by any consideration. Unless the employer is willing to give the employer something of value in return for agreeing to waive the right to work, the new garden leave provision may be unenforceable unless signed as a deed. By contrast, there is no downside to including a garden leave provision in the original contract.
The ability to exercise such a provision is the employers alone; an employee cannot demand to be put on garden leave. As such, a garden leave provision is simply an option that an employer may or may not decide to exercise. Further, garden leave can be used in association with other rights that arise during the notice period.
For example, an employee with a three-month notice period and a term allowing them to be put on garden leave for up to three months can be required to work out the first month of notice, be placed on garden leave for the second month and paid in lieu of notice for the third month.
Payment in lieu of notice
Employers should be aware that all garden leave provisions governed by Hong Kong law are defeated if the employee resigns and is prepared to make a payment in lieu of notice. Such a payment, if for the full amount of the notice period, will bring the employment contract to an immediate end. A provision allowing an employee to be put on garden leave during their notice period will then have no operation.
Drafting a garden leave clause
A well-drafted garden leave clause should include provisions:
- stating that the employee can be placed on garden leave for up to the full term of their notice period,
- stating that the employer is not required to give the employee any work during the garden leave period,
- stipulating that, during garden leave, the employee will continue to remain employed and therefore bound by all the usual obligations (including all implied common law obligations such as the obligation to act in good faith),
- specifying the acts that the employee is not entitled to do while on garden leave without the consent of the employer (which will normally include a ban on the employee attending the office, contacting customer and clients and accessing databases), and
- requiring the employee to be available to work if required or specifying the work that the employee will be required to complete while on garden leave (such as preparing files for handover to replacement staff).
Enforcing garden leave
Garden leave is usually invoked by simply informing the employee that they will be placed on garden leave under the relevant provision in the employment contract.
However, unlike most other terms of the employment contract, which are enforceable simply as contractual terms, the employer’s right to place the employee on garden leave is dependent on the garden leave being
- used to protect a legitimate interest of the employer, and
- no longer than is necessary to protect that interest (ie a similar test to whether a post-termination restriction is enforceable).
From a legal perspective, it is not immediately clear why a contractual term operating during the term of the employment should be subject to any further condition. By contrast – and as the name suggests – post-termination restrictions seek to operate after the employment contract has come to an end and there are good public policy reasons why an employer’s control over a former employee should be limited.
Nevertheless, it seems that if no legitimate interest will be protected by placing the employee on garden leave, or if the garden leave period is longer than necessary to protect that interest, the court may treat the garden leave provision as unenforceable and require the employer to allow the employee to continue to work during the notice period.