Garden Leave Slowly Gains Traction in the United States

A non-compete agreement is an agreement or clause in a contract specifying that an employee must not work for a competitor or enter into business in competition with the employer during or after employment.  Non-competes are used to protect company trade secrets and client relationships.  

Eleven states in the United States ban non-competes for low-wage or hourly workers (CA, DC, MA, MD, ND, NV, OK, OR, RI, VA, WA).  Some states allow non-competes as long as the employer pays the former employee; this is also known as “garden leave.”  Nevada and Washington State require companies to continue paying former employees bound by non-competes that have been laid off for reasons other than job performance.  In Oregon, employers can enforce non-competes otherwise barred by state law if the employer continues to pay the former employee.  Illinois requires employers to continue to pay former employees bound by non-competes if the employee was laid off due to COVID-19.

New Jersey is currently reviewing legislation that would require full pay and benefits to former employees when a non-compete is in effect.  The New Jersey bill (A3715) would require employers to pay former employees full pay and benefits even if the employee voluntarily left and took another job.  Although many businesses are against legally mandated garden leave, there has been an increase in employers voluntarily implementing garden leave in the financial services industry.  Garden leave is also commonly used in contracts for sales professionals.

Employees who believe their employer is subjecting them to illegal practices at the workplace should seek legal counsel to analyze their potential claims.