This is a guest blog – part 2 of 2 by Michael Scutt who is an employment lawyer. It explores garden leave, restrictive covenants and bonuses.
Another option open to employers is to place the departing employee on garden leave. This means that the employee remains just that, an employee for the duration of the notice period. The only difference is that they remain at home and will not be doing any work. Whilst on garden leave, the employee is entitled to continue to receive all salary and benefits but they must not compete against the employer or work for anyone else. A garden leave clause can be a most effective way of keeping an employee out of the job market and is likely to be more enforceable than a restrictive covenant.
Restrictive covenants come in various forms. Basically it is a type of clause that seeks to prevent the departing employee from undermining the business after they have left. Common restrictive covenants include non-solicitation of clients or prospective customers, non-poaching of colleagues and non-competition clauses. They can be for varying periods of time, such as one, three or six months, but the longer the duration, the more unlikely it is that clause would be enforceable, particularly with a non-compete clause which seeks to prevent an employee from working in the same business. This is a very complex area and close scrutiny needs to be given to such clauses if you are the employee seeking to leave. Traditionally the courts have been reluctant to enforce restrictive covenants and will only do so if they protect a legitimate business interest of the employer. In other words, a non-compete or non-solicitation clause against a senior salesman is likely to be more enforceable than against a receptionist or back office administrator with no client contact.
Don’t forget about any bonus that may be due. Many contracts of employment will contain a provision that the employee is paid an (often discretionary) bonus provided they remain in employment or are not under notice at the time the payment is made. Consequently, before handing in your notice you need to check to make sure that you will not be forfeiting that bonus if you leave at that time. In some cases it may be possible to negotiate for your new employer to pay you the bonus you are otherwise forfeiting in joining them, but that is a rare situation.
Finally, in some employment contracts you will find a provision that states you will bring the existence of restrictive covenants in it to the attention of your new employer. If there is subsequently a dispute and you fail to notify the new employer of the relevant clauses in the contract, it could lead to you being sued by the old employer, who will probably also take action against your new employer.
In summary then, when considering changing jobs it is worth checking your existing contract of employment and, if necessary, take advice from an employment lawyer. At the same time you could also take advice on the terms of the new contract you are being asked to enter into so that you are forewarned for any future issues that may arise when you finally move on from that employment.
In case you missed it, here is part 1:
Michael Scutt is an employment solicitor with Excello Law. (http://www.excellolaw.co.uk/solicitors/michael-scutt/) He can be contacted via firstname.lastname@example.org or (01707) 471030 or 0845 257 9449 Follow Michael on Twitter https://twitter.com/michaelscutt