What Garden Leave Means In New Zealand And When Employers Can Use It

If you’re running a small business, there are times when you need an employee to stop attending work immediately - but you still want to end the employment relationship properly, pay them correctly, and protect your business in the meantime.

That’s where “garden leave” often comes up. It’s a common concept in New Zealand workplaces, especially for roles with customer relationships, access to confidential information, or where an employee is leaving for a competitor.

In this guide, we’ll break down what garden leave means in a New Zealand context, when it can be appropriate, and how to use it without accidentally triggering an employment dispute.

What Is Garden Leave Meaning In A NZ Employment Context?

Garden leave is when an employee remains employed and continues to be paid, but you direct them not to attend work (and usually not to perform their normal duties) for some or all of their notice period.

In plain English: the employee is “on the payroll” but away from the workplace. The idea is that they can’t access your systems, clients, staff, or commercially sensitive information - while you still meet your obligations as an employer.

Is Garden Leave A Legal Term In New Zealand?

“Garden leave” isn’t a defined term in NZ legislation, but it’s widely used in practice. The key issue is not the label - it’s whether you have a lawful and reasonable basis to direct the employee not to work, and whether you handle the process fairly and in good faith.

Garden leave commonly comes up when:

• an employee resigns and you don’t want them active in the business during their notice period
• you’ve given notice of termination and want to minimise risk during the notice period
• there’s a sensitive situation (for example, conflict, client poaching concerns, or a workplace investigation)

Garden Leave vs Suspension vs Stand-Down

These concepts can get mixed up, so it’s worth separating them:

• Garden leave: employee is still employed, still paid, but told not to attend work (often during notice).
• Suspension: usually linked to alleged misconduct or an investigation. In practice, suspension is commonly on pay unless the employment agreement clearly allows otherwise and the approach is still justified and fair in the circumstances (unpaid suspension is higher-risk and needs particular caution).
• Stand-down: the ability to “stand down” an employee without pay generally depends on the employment agreement and the specific situation - it isn’t a free-standing option in most circumstances, so it can be risky if not handled correctly.

Because these situations can overlap, it’s a good idea to ensure your Workplace Policy and employment documents clearly set expectations about notice periods, directions, and workplace conduct.

When Can Employers Use Garden Leave (And When Should You Avoid It)?

Garden leave can be a smart risk-management tool - but only when it’s used for legitimate business reasons and handled fairly.

Common Situations Where Garden Leave Makes Sense

Garden leave is often used where a business wants to protect relationships, information, or operations. For example:

• Client-facing roles: sales staff, account managers, senior consultants, or anyone with strong client relationships.
• Access to sensitive information: pricing, supplier terms, margins, product plans, marketing strategy, technical documentation.
• Senior employees: managers who influence staff or can disrupt operations while they’re exiting.
• Competitor risk: where the employee is leaving to join a competitor and you need to reduce the risk of immediate solicitation or information misuse.
• Workplace tension: where it’s not practical for the employee to remain on-site during the notice period.

Imagine this: your operations manager resigns and is heading to a direct competitor in two weeks. Keeping them in the workplace during that time might increase the risk of confidential information walking out the door, or clients being contacted. Garden leave can create a cleaner separation while you transition access and responsibilities.

Situations Where Garden Leave Can Backfire

Garden leave can be risky if:

• it’s used to “punish” an employee or embarrass them
• you don’t have a contractual right to direct them to stay away (or you don’t have a genuine justification)
• it substantially harms the employee (for example, affecting professional registration requirements or commission arrangements) without a proper basis
• it’s used inconsistently between employees without a reasonable explanation

Because NZ employment law expects procedural fairness and good faith, you should be careful about automatically putting employees on garden leave just because they resign.

Do You Need A Garden Leave Clause In The Employment Agreement?

It’s not strictly required in every case, but if you want to use garden leave confidently and consistently, it’s best to address it clearly in the employment agreement.

A well-drafted clause can confirm things like:

• your right to direct the employee not to attend the workplace during notice
• whether the employee must remain available during business hours
• restrictions on contacting clients, suppliers, or staff
• return of company property and disabling system access
• whether commissions, allowances, or bonuses are treated in a particular way during garden leave

If your agreement is silent, you may still be able to direct an employee not to attend work in some circumstances - but you’re more exposed to arguments that you’ve acted unfairly, or that you’ve effectively changed the employee’s duties or working arrangements without proper basis.

This is one of the reasons it’s worth having a properly tailored Employment Contract from day one, especially for key hires.

How Does Garden Leave Interact With Restraint Of Trade Clauses?

Garden leave is often used alongside post-employment restraints, like non-compete and non-solicitation clauses.

From a business owner’s perspective, the logic is simple: the longer the employee is away from your active operations and client base, the more your relationships stabilise and the less “fresh” their influence is when they start elsewhere.

However, restraints need to be reasonable and tailored to the role to be enforceable. If you’re using garden leave as part of a broader strategy to protect your business, it’s worth getting advice on Restraint Of Trade Advice and whether you also need a Non-Compete Agreement (or clauses within the employment agreement).

How To Implement Garden Leave Properly (A Practical Checklist)

Even if you have a garden leave clause, how you apply it matters. In New Zealand, employment relationships are governed heavily by the duty of good faith under the Employment Relations Act 2000. That means you should be transparent, act reasonably, and avoid misleading or unfair conduct.

Here’s a practical process many small businesses follow.

1) Check The Contract And Notice Period

Start with the basics:

• What is the notice period (and is it being worked, or paid out)?
• Is there a garden leave clause, and what does it permit?
• Are there commission arrangements, car allowances, or bonuses that need careful handling?

If you’re considering not having the employee work their notice period at all, you may also be deciding between garden leave and payment in lieu of notice. The right option depends on what your agreement says and what outcome you’re trying to achieve.

2) Confirm The Direction In Writing

To avoid confusion (and to protect your business if there’s later a dispute), confirm the garden leave arrangement in writing. Your letter/email should cover:

• the start and end date of garden leave
• pay arrangements (and what happens with allowances/commission)
• expectations about availability during business hours
• instructions not to attend the workplace unless invited
• confidentiality obligations and return of property

Keep the tone neutral and professional. If the employee feels publicly “marched out”, that’s when you see grievances about humiliation or unfair treatment.

3) Remove Access And Secure Information

Garden leave is often about reducing risk. Practically, that means:

• disable access to email, shared drives, CRMs, and internal tools
• change passwords and revoke admin access
• collect laptops, keys, swipe cards, and phones (or manage them remotely)
• remind the employee of confidentiality and IP obligations

If you’re collecting personal information or monitoring systems during the offboarding process, make sure your internal approach aligns with privacy obligations under the Privacy Act 2020. In many workplaces, an Employee Privacy Handbook helps set clear expectations around devices, monitoring, and access.

4) Plan The Handover Properly

Garden leave shouldn’t mean “we’ll sort it later.” Use the notice period strategically:

• prepare internal handover notes while the employee is still available (if appropriate)
• reassign key accounts and introduce new contacts to clients
• document current projects and deadlines
• update authority levels (banking approvals, supplier ordering, etc.)

Sometimes, the best approach is a partial garden leave: you may ask the employee to complete a handover for a short period, then begin garden leave once the handover is complete.

What Are Your Legal Obligations While Someone Is On Garden Leave?

A common misconception is that once an employee is on garden leave, they’re “basically gone.” Legally, they are still employed - and that matters.

You Still Need To Pay Them Correctly

In most garden leave arrangements, the employee continues to receive their normal pay. This can include:

• base salary or wages
• agreed allowances (depending on the contract wording)
• KiwiSaver contributions (as required)
• any entitlements that continue to accrue during employment (for example, annual leave)

Be careful with any deductions. The Wages Protection Act 1983 sets rules around wage deductions, and you generally can’t just “deduct” money because you’re unhappy about the resignation or performance.

They Still Owe You Employment Duties

Because the employee is still employed, their core obligations usually continue, such as:

• acting in good faith
• confidentiality
• not misusing company information
• following reasonable lawful instructions (like returning property)

This is one of the reasons garden leave can be useful: it creates a controlled period where the employee is separated from your operations, but still bound by employment obligations.

You Still Need To Handle The Exit Fairly

Even though they’re not at the workplace, you still need to act reasonably and in good faith in how you communicate and manage the exit. For example, abruptly sending someone home without a clear explanation or handling the process in a humiliating way can become part of a wider employment dispute.

This doesn’t mean you can’t use garden leave - it means you should apply it carefully, consistently, and respectfully.

Key Takeaways

• Garden leave generally means the employee remains employed and paid, but you direct them not to attend work (often during their notice period).
• In New Zealand, garden leave isn’t a defined statutory term, so the safest approach is to include a clear clause in your Employment Contract.
• Garden leave can be useful for protecting confidential information, client relationships, and staff stability - particularly where an employee is moving to a competitor.
• Because employees remain employed during garden leave, you still need to meet obligations around pay, good faith, and fair treatment under the Employment Relations Act 2000.
• If you’re using garden leave as part of a broader protection strategy, it’s worth reviewing your restraint provisions and getting Restraint Of Trade Advice so your approach is enforceable and reasonable.
• Clear written communication, secure offboarding (access and property), and a planned handover help reduce the risk of disputes.

If you’d like help updating your employment agreements, adding a garden leave clause, or putting the right restraints and policies in place, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.