It is generally believed by employers that they have the right to send an employee on “gardening leave” either when the employee tenders notice of resignation or the employer provides notice of termination. There is a slightly different situation where the employer terminates an employment contract without notice and tenders in lieu a payment equivalent to the sum which would have been earned during the notice period.
The reasons most often advanced to justify an employer doing so include reducing the risk that in an acrimonious break up, an employee can do an employer much harm.
In the first case, under normal circumstances, the contract remains on foot, and the employee remains on the payroll thus preserving the employee’s obligations of good faith and fidelity to the employer, thus preventing the employee from working for a competitor during at time.
In the second situation, the contract comes to an end and the employment relationship ceases, thus negating any of the contractual obligations by either party.
In Actrol Parts Pty Ltd v Coppi (No 2) (2015) VSC 694, a decision of the Supreme Court if Victoria, the question of the entitlement of an employer to place an employee on gardening leave arose, with the employee contending that the actions of the employer in doing so were a fundamental breach of his contract on the basis that there is no provision in the Fair Work Act dealing with the situation, and his contract of service was silent about this.
The employee’s position on this argument was rejected by the Supreme Court, which relying upon a line of common law cases about the circumstances in which terms may be implied into contracts, held that “it was entirely reasonable for (the employer) to protect itself from the risk of harm that might flow from (the employee) performing normal duties in the particular factual circumstances.”
Nevertheless, this was a somewhat pyrrhic victory for the employer though, because the court also upheld the employee’s claim to the effect that the direction by the employer for the employee to return his company provided car, IPhone, Ipad and laptop constituted the repudiation by the employer of its obligations, which the employee had the option of either accepting, and thus bringing the contract to an end, or not, in which case the employee could have held the employer to the contract and sued to recover damages, if any.
In this tricky legal situation, an employee as the innocent party is bound to communicate his or her acceptance of repudiation, and the case also dealt with whether this needed to be communicated directly to the employer, with the employee arguing that his acceptance of alternative employment with a competitor of the employer was sufficient compliance with the requirement to provide notice of acceptance or not. The Supreme Court also found in favour of the employee on this ppint holding that “the election of the innocent party can be communicated to the defaulting party directly or indirectly and by words or conduct.”
The Court has yet to determine what remedy the employee will succeed in obtaining.