What’s a ‘garden leave’ clause (and does your business need one)?

As a business owner, you know who the key players on your team are — and you understand the potential risk that your business faces if a team member decides to leave and set up shop elsewhere. Everything from your client list to your plans for a new product could be at risk. You probably have noncompete agreements in place with at least some of your employees.

However, is that really enough to protect your business? No, not really.

As employees start to understand the power of information and the tremendous capacity they have to wreak havoc through technological means, it’s becoming more and more common for employees to take revenge on their employers when they leave — whether they’re leaving voluntarily or not.

Altogether, acts of revenge from disgruntled employees on their way out the door have cost companies anywhere between $5,000 and three million per incident. More than a third of employees — 35 percent — surveyed for one study say that taking an employer’s proprietary information is “common.”

How can you stop this from happening to your business? One method that you might consider is instituting a “garden leave clause” in your employee contracts. These can exist in conjunction with any noncompete agreements you have.

Originally a concept in the United Kingdom, companies in the United States like Morgan Stanley and Citigroup have recently adopted the practice. Once an employee gives notice that he or she intends to leave — or is given a notice of termination — the garden leave provision kicks in.

Employees on “garden leave” are stripped of their physical and electronic access to a company. They do not work but continue to receive their salaries and benefits for a length of time (two or three months is common). That is usually enough time to “age” any information employees may already have taken and make it less valuable.

The ongoing pay and benefits can also soften the blow when an employee isn’t leaving voluntarily, giving him or her time and opportunity to make new plans and find new options. It may also reduce an employee’s desire to exact revenge from an employer after a termination.

An experienced attorney can provide more information on the use of noncompete agreements, garden leave clauses and other protective measures for your business.