Garden leave

What it is

Garden leave is a period, usually all or part of your notice, during which you stay employed and paid but are told not to work, not to come in, and not to contact clients, suppliers or colleagues. Your employment ends on the date it would have ended anyway. Only your duties stop.

Employers use it for two reasons. It keeps a departing executive away from clients, deals and confidential information while the business adjusts. And because you are still employed, it stops you starting with a competitor before your notice runs out.

Maltese employment legislation does not define garden leave. How it applies to you depends on your contract, read with the general rules on notice in the Employment and Industrial Relations Act (Cap. 452).

Can your employer put you on garden leave?

Start with your contract. Most senior contracts now include an express garden leave clause. Where there is one, the employer can usually rely on it within its terms: how long it lasts, what you may and may not do, and whether your benefits continue.

Where there is no clause, the position is less certain. An employer that keeps paying you in full will argue it can simply ask you not to work, and for many roles that argument is strong. It is weaker where doing the work matters in itself: where your skills or professional standing depend on staying active, or where a regulator expects you to keep performing an approved role. Take advice before you accept or resist garden leave that your contract does not provide for.

What you keep

You remain an employee until your notice ends, so:

• Salary continues in full.
• Contractual benefits, such as health insurance, a car or allowances, normally continue unless the contract says otherwise.
• Leave keeps accruing. Check whether the contract lets the employer require you to use accrued leave during garden leave.
• Bonus and share awards depend on the plan rules. Some plans pay only those in active employment, or not under notice, on a set date. Garden leave can take you outside a plan without anyone saying so. Read the plan rules before you agree the dates.

What you still owe

Garden leave is not freedom. While you are employed, you still owe your employer:

• fidelity: you cannot work for a competitor, or prepare a competing business beyond what your contract allows;
• confidentiality, as before;
• availability: most clauses require you to stay reachable and to help with the handover if asked.

Starting a new role before your notice ends, without your employer’s agreement, is a breach of contract. It can cost you the rest of your pay, and more.

Garden leave and your non-compete

This is where most of the value lies. If your contract has both a garden leave clause and a post-employment non-compete, the employer may try to apply them one after the other: six months at home, then twelve months out of the market. Maltese courts ask whether a restriction is reasonable, and the total time you are kept away from your sector is part of that picture.

The better course is to settle it in the exit terms: garden leave counts against the non-compete, or the non-compete is shortened or released.

If you hold a regulated role

If you are an MGA key function holder or hold an MFSA approved role, garden leave raises a further question: who performs the function while you are at home. The employer needs an interim arrangement and must notify the regulator. Agree the timing and the wording of that notification as part of your exit. It can follow you to your next approval.

What to negotiate

• the length of garden leave, and your right to be released early if you find a new role;
• whether the employer may pay in lieu instead, and on what terms;
• that garden leave counts against any non-compete, or that the covenant is shortened;
• how bonus and share awards are treated for the period;
• how your departure is announced, internally and to clients, and your reference;
• access to email and systems, the return of property, and the handover.

An exit review sets out where you stand on each of these, and negotiation and settlement is how they are agreed.

For employers

Garden leave protects the business only if it is in the contract and used with care. Paying a senior executive for months at home is expensive. Combine it with a covenant that is too long and you risk losing both in a dispute. Put the clause in at hiring, and settle how it will be used at the exit.