Leave in lieu of notice

What is leave in lieu of notice?

While not referred to in employment legislation, ‘leave in lieu of notice’ is a term used to describe a period when an employee remains employed, and receives full pay, but does not report to work. It's sometimes known as 'garden leave'. This type of special leave might be used when an employee resigns, when there are relationship issues in the workplace, or when a permanent employee has no work to do.

Leave in lieu of notice can be useful, but before it is taken, both employer and employee must agree to its use. This agreement must include leave in lieu of notice provisions in the , entered into in good faith.

Good faith

While on leave in lieu of notice, employees must continue to follow the terms and conditions of their employment. This includes any lawful restrictions on working for another employer.

Leave in lieu of notice should not be used to get around the requirements for suspension. Appropriate grounds for suspension, and the right process, must be followed instead.

Leave in lieu of notice provisions

Provisions for leave in lieu of notice in employment agreements may be general or specific. With any provision, the employer must act fairly and reasonably when enforcing them.

Specific clauses might state that the employer may direct an employee not to report to work, undertake work-related duties or contact clients, customers or suppliers during their notice period (but that the employee will receive their full pay for this time).

General clauses might give the employer the ability to direct an employee not to report to work or do work-related duties at any time and for any reason (but the employee will receive their full pay for this time).

Leave in lieu of notice during notice periods

If an employee resigns, an employer might want to use leave in lieu of notice during their notice period for a variety of reasons. For example:

• The employee has access to commercially sensitive information and is going to be working for a competitor at the end of their notice period. Any limit of trade provision would take effect after the employee’s employment ends. However, employers should be aware that if an employee’s employment agreement contains both a leave in lieu of notice provision and a restraint of trade provision, the period the employee is on leave in lieu of notice may be taken into consideration in working out if the restraint of trade provision is reasonable (and therefore enforceable). The restraint of trade provision takes effect after the end of the leave in lieu of notice period.
• The employee is distracting other workers while they’re in their notice period.
• The employee is being made redundant and the employer is not requiring them to report to work during their notice period, so they can look for other job opportunities while they can still say they’re currently employed.
• The employee has been dismissed on notice and their presence is creating an uncomfortable atmosphere for everyone.
• The employee has no work to do.
• There is a difficult (but not disciplinary) relationship situation at work and the employer considers that it would help in taking heat out of the situation if 1 (or both) of the parties did not attend work while the parties go through counselling. In this type of situation, the employer would need to make sure that the employee agrees so it is clear they’re not being suspended or punished.

Final pay

Requesting leave in lieu of notice

While there is no obligation for the employer to accept a request for leave in lieu of notice, situations where an employee may request it include if they:

• are being made redundant or dismissed on notice, so they have more time for job searching
• have resigned and do not want to be at the workplace during their notice period for professional or personal reasons
• are being investigated for a disciplinary matter and want to avoid being formally suspended. In this case, an employer will have to make sure they’re treating employees in similar situations consistently.

Disciplinary process

Alternatives to leave in lieu of notice

There are other options employers can consider, instead of leave in lieu of notice. These include:

• Placing the employee on alternative duties.
• Payment in lieu of notice (which ends the employment right away).