Should I stay or should I go now? Garden leave or pay in lieu of notice?

When you are ending your employment relationship either by choice, by mutual agreement or because you have been dismissed a common issue which arises is whether you should agree to be paid in lieu of notice or spend your notice on garden leave. 

Not all employment contracts provide for garden leave but many do especially if you have a more senior role. The aim of garden leave clauses is to remove you from the business you are leaving so that you cannot do anything untoward such as line up clients to leave the company with you. It also puts you out of whatever market you work in for a period to reduce the risk that you will do something to impact the company you are leaving. Many contracts will have post-termination restrictive covenants that you will be required to observe even after you leave unless you have negotiated to dispense with these during termination discussions. In any event you have a continuing common law obligation to preserve the trade secrets of your employer. A trade secret is something you could only have known because you worked for that company. The wider knowledge that you have learned from your professional skills are not trade secrets. 

The issues to consider when deciding between being paid in lieu of notice or spending notice on garden leave include the following:

• Your contract terminates immediately meaning you are able to start a new job straight away. If you can secure a new job quickly this gives a windfall because you will be paid for your notice period and earning in your new job. 

• There is no obligation for your employer to pay your pension contributions if a PILON payment is made so you lose out financially on those.

• Many contracts provide that you may have to use accrued holiday during garden leave. If you take a PILON payment you can ask to be paid in lieu of accrued holiday which adds more value to your exit payments. 

• You may end up with a gap on your CV if you cannot find another job quickly. This worries a lot of people but in reality these days many employers don’t take much notice. They understand that people leave jobs even before securing another and you have the opportunity to talk through why there is a gap. It does not necessarily indicate anything nefarious. Employers understand why other employers pay in lieu. It’s the way the world of work works. 

• When you are on garden leave you remain employed and continue to be bound by all of the obligations of your contract other than the requirement to attend work. This means that during working hours you must be available to answer any questions your employer may have. It also means that you must not do anything to breach your contract during this period which would entitle your employer to terminate your contract for cause. 

• A particular concern for departing employees who are on garden leave and where there has been a dispute with the employer is that while you continue to be employed this does give your employer the opportunity to uncover any wrongdoing or shortcomings in your performance which might permit them to terminate you for cause. You have to be 100% certain that you have no skeletons. 

One to weigh up in terms of what is best for you and if you are entering into a settlement agreement one to ask your advising solicitor about.