“Garden Clause” vs. a Non-Compete

In Contracts, Non-Compete Agreements by Jake GoldsmithLeave a Comment

A garden clause and a non-compete clause can both be valuable tools for a company, and they are somewhat similar, so they are sometimes confused. Both clauses concern an employee who is leaving the company, but there are some fundamental differences between the two.

What is a Garden Clause?

A garden clause typically provides for a notice period for termination of the employee. Basically, the employer is required to give the employee notice of termination, before the employee is terminated. The employee is still employed by the company during the notice period and still receives pay during that time. This period is typically referred to as “garden leave,” hence the term “garden clause.” However, there are typically some stipulations during the garden leave. For example, it is not uncommon for the employee to be required to stay away from the company during the garden leave. The term garden leave originated in Europe and arose to describe a situation where the employee was essentially being paid to tend his/her garden. We don’t see them very often here in the US, but they are becoming more common. The intent behind garden leave is typically to prevent an employee from engaging in behavior which could be harmful to the company during the time in which the employee knows that their employment is coming to an end.

What is Non-Compete?

A non-compete, on the other hand, contains restrictions on what the employee can do after they have left the company. A non-compete clause will usually prevent an employee from engaging in business in the same industry as the company for a certain period, within a certain distance of the company. There are legal limitations on both how long the non-compete can apply and how large a geographical area can be restricted, but those limitations will vary from state to state.  The intention behind a non-compete is usually to keep the employee from taking the knowledge acquired through their employment with the company and using it to benefit one of the company’s competitors.

You may have figured this out already, but these two clauses are not mutually exclusive. It is entirely possible to have both a garden clause and a non-compete. In some circumstances, you may benefit greatly from including both. Of course, the language, conditions, and restrictions can vary greatly with both garden and non-compete clauses. Therefore, it is very important to make sure that your clause does what you intend it to do. If you simply pull a standard clause off the internet for your employment agreements, there is a good chance you could be locking your company into terms that differ greatly from what you expected.

The big takeaway here is that a garden clause is effective at the end of the employment but while the employee is still with the company. A non-compete takes effect after the employee has left the company altogether. Both are useful devices, but you must consider what your specific concerns and intentions are when drafting these clauses.

Ready to speak to an Attorney?
Contact us or give us a call at 505.848.8581

Business Law Southwest, LLC. Business Law That Makes Business Sense. A Slingshot company.

Leave a Comment