O’Hagan Meyer’s Alan Albert has won a precedent-setting victory in Delaware’s Superior Court, upholding the decision of a medical practice employer to place a physician employee on “garden leave” during the final portion of a contractually-mandated six-month notice period for voluntary termination of employment.
“Garden leave” has been utilized regularly with respect to the departing employees in the United Kingdom and in other countries whose legal systems are based on the UK’s, but its use in the United States has been relatively rare. A departing employee placed on “garden leave” typically is paid full, or at least substantial, compensation during the leave period, but told not to report to work. The leave period generally coincides with a contractually-mandated notice period for the voluntary termination or non-renewal of employment.
In the Delaware case, the employer placed a physician who had given his contractually-mandated six-month notice of voluntary termination of his employment on “garden leave” for the last months of the notice period. In doing so, the practice relied solely on a general contractual provision granting its board “complete discretion” to “direct, control and supervise” the physician-employee’s performance of his duties; the employment contract contained no specific provision authorizing “garden leave.”
The physician-employee sought a declaratory judgment holding that his placement on garden leave – in effect, “benching” him during the notice period — breached the employment contract, and thus invalidated a contractual noncompetition covenant enforceable by liquidated damages. The practice counterclaimed, seeking a declaration that it was within its contractual rights to place the physician on garden leave, and a judgment for breach of contract for the departed physician’s repudiation of and failure to pay liquidated damages established by contract.
Judge Richard C. Cooch, the seniormost jurist on Delaware’s Superior Court, sided with the medical practice employer, holding that the practice’s contractual right to “direct, control and supervise” the physician’s performance of duties was sufficiently broad to authorize the garden leave in the departing employee’s terminal months of employment.
The decision resolves a matter of first impression in Delaware, and is notable beyond Delaware’s borders for its affirmation of the use of garden leave by an employer even in the absence of an explicit contractual provision authorizing the employer to utilize it. As the number of states enacting restrictions upon the use and enforcement of traditional noncompetition covenants rises, garden leave poses a potentially attractive alternative to the traditional negative covenant barring employment for a specified period within a specified area or market.
Albert has thirty years’ experience in complex civil and criminal litigation, and is recognized in nine different categories in The Best Lawyers in America, including commercial litigation. His prior clients include Muhammad Ali, for whom he successfully won back the wrongfully-misappropriated rights to his life story that made possible the feature film Ali.