restrictive covenants

Garden Leave Clauses in California

What are garden leave clauses?

Popular in England for many years, garden leave clauses are increasingly being used in the United States.  Typically, these clauses are inserted in an employee’s employment contract and are designed to extend an employee’s duty of loyalty beyond the employee’s desired term of employment by requiring the employee to remain with the company in a reduced or often nonexistent role. [1] This is accomplished by either requiring the employee to give notice well in advance of departure (ex. three to six months) or by requiring the employee to remain with the company for a  period of time after expressing his or her wish to leave. During these periods the employee remains on the payroll, but no longer participates meaningfully in the operation of the business and may even be told to stay away from the business altogether, giving the employee leave to “tend their garden” instead. (more…)

A summary of the state of restrictive employment covenants in California

Employee mobility can be a thorny issue for companies of all sizes and employees of all pay grades.  In California, this issue is especially challenging given the state’s strong policy against non-compete agreements.  Simply put, compared to some other states, there is little a California employer can do to prevent an employee from leaving for another company, even if that company is a direct competitor. Section 16600 of California’s Business and Professions Code states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”  The California Supreme Court, in its 2008 decision in Edwards v. Arthur Andersen, made clear that the statute prohibits a range of restrictive post-employment agreements, not just traditional non-compete agreements, which prohibit ex-employees from competing with their former employer for a limited period of time and in a limited geographic area.  So where does that leave California employers? (more…)