The NSW Supreme Court has again re-affirmed that gardening leave periods will be considered in assessing the overall reasonableness of post-employment restraints.
In DP World Sydney Ltd v Guy [2016] NSWSC 1072, Justice White held that a restraint period of 3 months, which followed an earlier gardening leave period of 3 months was valid and reasonable in the senior executive’s particular circumstances – which effectively saw the executive sit out for 6 months in total.
What sets this decision apart from your ‘typical’ restraints case is the Court’s consideration of a post-employment restraint clause when coupled with an effective ‘gardening leave’ clause. Significantly, Justice White said at [54]:
“…the validity of the restraint in cl 19.1 is to be judged in the light of the grant to DPW of the right to require Mr Guy to go on gardening leave for three months before the three-month post-employment restraint commenced. In effect, the contract allowed for Mr Guy, if he gave notice of termination of his contract, to be taken out of the market for a period of six months and that is what has happened.”
Obviously, the decision provides further support for employers using ‘gardening leave’ periods, in combination with well drafted restraints, to protect their business interests for the longest period of time possible.
But, we actually think that the decision should prompt employers to consider whether they need to include such long notice/gardening leave periods in their executive contracts (particularly when employers have to pay for that longer period!) when they can simply rely on the reasonableness of the restraint in combination with a shorter notice/gardening leave period.
If your contracts need a ‘refresh’ or ‘rethink’ in terms of their gardening leave, post-employment-restraints and confidential information provisions, please don’t hesitate to give us a call.
