Garden Leave: A US Employer Guide to Paid Notice

The first time somebody senior resigned on me, I had him out of the building inside two hours. Badge back, laptop back, a short note to the team. I thought I was being decisive. What I had actually done was hand a competitor a fully rested employee, at my own expense, several weeks early.

He started at a customer of ours eleven days later. Nothing about it was unlawful. He had signed a restrictive covenant in a state that treats most of them as void, which I had not checked, and even in a state that enforces them I would have needed a lawyer, a judge and months I did not have.

Garden leave is the other answer to that problem, and almost no small American employer has heard of it, because the phrase came out of British banking and still sounds like it belongs there. Strip the accent off and the mechanism is plain. The person is still your employee, still on your payroll, and not in your building.

I build the HR and people records tooling for companies with no HR department at FirstHR. This is general information rather than legal advice, and restrictive covenants are the corner of employment law where state variation is widest, so a clause like this deserves a lawyer before it goes into a contract.

What Garden Leave Is

Garden leave is a paid notice period during which the employee is required to stay away from work. Employment continues to a fixed end date, salary and benefits continue with it, and the employee is barred from customers, systems, files and colleagues for the whole run.

The purpose is time, and time only. Customer relationships cool. Market intelligence goes stale. Prices, roadmaps and pipeline numbers become last quarter’s. A replacement gets hired and briefed while the outgoing person is still available to answer questions by email.

The cost is equally plain. You are paying full salary for output you have deliberately switched off, and you are doing it at the exact moment you also have to pay somebody to do the job. That is why the clause belongs in a small number of contracts rather than in a handbook, and why the length of the notice period matters more than the fact of having one.

Two other things travel with it, and both are easy to miss. The person is still an employee for every purpose your other policies use that word, and they are still costing you money while producing nothing. Anyone drafting the clause has to price both.

Not Suspension, Not Severance, Not a Furlough

Garden leave sits in a family of arrangements that look alike from the outside and behave very differently in payroll, benefits and unemployment. The dividing questions are simple: is the person still employed, and is anyone still paying them.

The difference from a furlough is money: a furlough removes the work and the wages, while garden leave removes only the work. The difference from suspension is intent. A suspended employee is expected back at their desk; a person on garden leave has an end date already written down.

The difference from a severance package is the one that changes the most downstream mechanics. Severance is post-employment money, normally exchanged for a release of claims, and the recipient is free to start elsewhere immediately. Garden leave is salary, paid because the job has not ended yet.

That distinction runs straight through your payroll and benefits administration. Continuation coverage is triggered by the end of employment, not by the start of the notice period. The clock on final paycheck deadlines starts on the last day of employment. Accruals, vesting and bonus eligibility keep behaving as though the person still works there, because they do.

It also changes the unemployment picture. Somebody receiving full wages under a live employment relationship is not in the position an unemployment claim normally contemplates, and state agencies treat wages in the period as wages. Do not treat that as a rule for your state without checking, but do not budget for garden leave as though it were severance either.

They Are Still an Employee, With Everything That Carries

The whole legal strength of garden leave comes from one fact: the employment relationship has not ended. Every duty an employee owes their employer stays alive, and so does every duty you owe them.

On the employee’s side, the duty of loyalty continues at common law for as long as the relationship does. Soliciting your customers, recruiting your staff, or setting up a competing operation during the notice period is a breach of an existing obligation, not a post-employment restraint you would have to prove was reasonable. That is a materially easier argument to make.

Confidentiality works the same way, and it sits on top of whatever confidentiality agreement you already have. So does the acceptable use policy governing your systems, which is exactly why cutting access on day one is defensible: you are not punishing anybody, you are removing a tool from someone who no longer has work to do with it.

On your side, pay and benefits run in full, and for an exempt employee federal law reinforces part of that. An exempt employee must receive the full salary for any week in which they perform any work, and deductions may not be made for absences caused by the employer or by the operating requirements of the business when the employee is ready, willing and able to work (29 CFR 541.602).

Read the rest of that rule before you lean on it. The same regulation says an exempt employee need not be paid for a workweek in which they perform no work at all, which is precisely the shape of a long garden leave. The obligation to keep paying comes from your contract, not from the wage and hour rules.

Garden Leave Set Against the Non-Compete

These are two answers to the same question, and they fail in opposite directions. A non-compete agreement restrains somebody after they stop being yours, costs nothing until you try to use it, and needs a court. Garden leave restrains somebody who is still yours, costs full salary immediately, and needs nobody’s permission.

Read the last three rows as the honest case against garden leave. It is expensive, it stops the day the money stops, and it does nothing about the eighteenth month. If what you fear is a competitor being built two years from now, paid notice will not touch it.

Read the first five as the case for it. The thing that makes a non-compete fragile, the fact that it operates against a free person after the relationship has ended, is the exact thing garden leave avoids. You are not asking a judge to restrain a stranger. You are administering an employment relationship you are still funding.

In practice the two stack rather than compete. A contract can require ninety days of paid notice and then a short, narrowly drawn restraint afterwards, with the paid period counting toward the total restricted time. Florida has legislated exactly that structure, requiring a covered non-compete period to shrink day for day against the nonworking part of a garden leave notice period.

Why Paid Notice Fares Better Than an Unpaid Restraint

Courts and legislatures have never liked restraints that leave a worker unable to earn. Paying through the restricted period removes the objection that carries the most weight, which is why the recent wave of state legislation keeps converging on the same idea: you may restrain, if you pay.

State law is now where the whole question lives, and it moves every year. The table below reflects the position as this was written; treat it as a map of the patterns rather than as a substitute for checking the statute in the state where the employee actually works.

Florida is the one to read if you want to see the idea fully drawn. Its statute lets a covered agreement require up to four years of advance notice, requires the same salary and benefits the employee had in the month before notice began, relieves the employee of any obligation to provide services after ninety days, and lets the employer shorten the period on thirty days of written notice (Florida Statutes chapter 542). Coverage reaches only employees earning more than twice the annual mean wage of the county where the employer has its principal place of business, or of the employee’s own county if the employer sits outside Florida, and health care practitioners are excluded outright.

Massachusetts approached it from the other end. Rather than authorizing garden leave, it made a version of it the price of a non-compete: an agreement must be supported by a garden leave clause paying at least half of the employee’s highest annualized base salary from the prior two years, or by other consideration the parties agree and write down (Massachusetts General Laws chapter 149, section 24L). The same statute caps most restraints at twelve months, requires that the agreement reach the employee by the earlier of a formal offer or ten business days before work starts, states a written right to consult a lawyer, and puts nonexempt employees, student interns, workers aged eighteen or younger and anyone terminated without cause or laid off outside its reach.

The At-Will Problem You Have to Solve First

None of this works without a contract, and almost no American employee has one. At-will employment means either side can end the relationship at any moment for any lawful reason, which means your team can resign on a Friday and start somewhere else on Monday. There is no notice period to pay through unless somebody wrote one.

The second problem is what happens if the employee simply refuses. No American court will order a person to remain in a job. In a 2008 federal case in Massachusetts, a brokerage sought to enforce a ninety-day paid notice clause against a departing broker who had gone straight to a competitor; the court found the firm likely to win on its breach of contract claim but refused a preliminary injunction, because the effect would have been to compel an employment relationship the broker no longer wanted. The claim survived. The clause did not put him back at his desk.

So the honest description of a notice clause is this: it gives you a contractual claim, a lawful basis to keep paying and restricting anyone who complies, and a great deal of practical weight in the conversation that follows a resignation. It does not give you a body at a desk. Most people comply because the alternative is walking away from a quarter of paid salary and starting a new job in a lawsuit.

The third problem is consideration. Adding a notice clause to an existing employee’s terms is a change to the bargain, and states differ sharply on whether continued employment is enough to support it. The clean moments to introduce one are hiring, promotion, and any point where real money changes hands, which is one reason it usually rides along with executive compensation rather than arriving on its own.

Make the obligation mutual while you are there. A clause requiring the employee to give ninety days and permitting you to end the relationship without notice reads as one-sided to everyone who will ever look at it, including the judge. Mutual notice is fairer, more persuasive, and costs you very little given how rarely you will use your own side of it.

Where It Actually Fits in a Small Company

Paid notice earns its cost in a narrow band of roles: people who carry client relationships, people who hold commercially sensitive information, and people whose departure would otherwise be instantly visible to a competitor. For everyone else it is an expensive answer to a problem you do not have.

There is a version of the arithmetic worth doing before you write anything. Take the salary you would pay for a ninety-day notice period, and set it against the realistic cost of the accounts you might lose in the same ninety days without one. For a founder-level salesperson that is not a close call. For a mid-level individual contributor it usually is.

The other thing to weigh is what the clause does to hiring. A senior candidate reading a ninety-day notice requirement is reading a constraint on their next move, and some will price it into what they ask for. That is a real cost, not a hypothetical one, and it is a good reason to keep the period as short as the risk allows.

How to Write the Clause

A usable garden leave clause does five things: it creates a notice obligation, it gives you the option rather than the duty to remove the person from work, it fixes pay and benefits at their existing level, it says plainly what the employee may and may not do, and it lets you shorten the period.

Two drafting habits are worth stealing from the states that have legislated. Give the employee a written right to consult a lawyer and a real window to do it, which Massachusetts requires and Florida builds into its seven-day review period. And never write a clause that lets you stop paying while the restriction continues, because that converts paid notice into the unpaid restraint you were trying to avoid.

Running the Notice Period Without Creating a Claim

Once somebody is on garden leave, the risk shifts from drafting to administration. The employee is still employed, so everything you do to them during the period is an employment act, judged by the same standards as any other.

Handle access on the first day and handle it neutrally. Revoke system and file access, redirect email to a named manager, and collect equipment against your IT offboarding checklist rather than improvising. Doing it the same way every time is what makes it administration instead of a message.

Tell customers yourself, early, in writing, and without editorial. A short note saying who now owns the relationship, copied to the departing employee where the relationship is warm, does more to protect the account than any clause. The point of buying the time was to make that call before somebody else did.

Tell your team something true. People notice an empty chair, and a vacuum fills with worse information than you would have supplied. A sentence confirming the person is leaving, that a handover is under way, and who to go to in the meantime is enough, and it belongs in the same register as the rest of your offboarding process.

Keep paying on the normal schedule and keep the record straight. The person stays on the payroll, in the benefits census and in the employee record until the notice period expires, at which point the ordinary termination steps run: final pay by your state’s deadline, continuation coverage notices, and the exit paperwork. A system that already holds contracts, access and dates in one place at FirstHR makes that transition a task list rather than a memory test.

One temptation to resist. Do not use the period to build a case against somebody or to monitor them more closely than you would any other employee, because that turns a clean commercial arrangement into the beginning of a claim. If there is misconduct, investigate it properly; if there is not, pay the notice and let the clock run.

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