Termination of employment letters
In your letter
A termination of employment letter serves a significant purpose in bringing the employment relationship to an end.Read more...
The NRL’s Manly Sea Eagles have faced an uncomfortable situation regarding a key employee in recent times. Just as the club’s pre-season was about to start, it had two head coaches ready, willing and able to show up for training. Trent Barrett had tendered his resignation from the position in June 2018 and was serving out his twelve-month notice period. In the meantime, the club had also hired Des Hasler to replace Barrett as the head coach.
Despite hiring a new coach, the club remained adamant that it would not pay Barrett in lieu of the notice period and would require him to attend for work, apparently in a different role. It had also been reported by various journalists that he was being required to attend work because the club either would not or could not afford to pay him a lump sum in lieu of the notice period.
The head coach double-up was ultimately avoided following an agreement that the club would pay Barrett his normal pay in monthly instalments on the proviso that he no longer attended the workplace. Essentially, Barrett has been placed on ‘garden leave’.
From a broader workplace relations perspective, this saga raises interesting questions about how employers can manage employees during their notice periods. There are a number of options available to employers which are briefly described below:
(1) Payment in lieu of notice
An employer may wish to pay an employee in lieu of them working the requisite notice period. This may be because it is easier to terminate the employment relationship and hire a replacement straight away, or because there is a risk that the departing employee will be disruptive, unproductive and/or misuse confidential information.
(2) Working out the notice period
Alternatively, an employer can require a departing employee to work out all or part of the notice period. This may be to allow the departing employee to finalise tasks or assist in training a replacement employee.
(3) Garden leave
Finally, an employer may be able to place an employee on ‘garden leave’. As with Barrett and the Sea Eagles, this involves paying an employee during their notice period (as they would normally be paid) but directing them to not attend the workplace and to not perform any duties – instead requiring them to, theoretically, spend that time at home.
The employee remains an employee and is still required to comply with any of the employer’s reasonable and lawful directions as may be required.
There are various reasons for an employer to place an employee on garden leave. For example, if it is known that the employee is leaving to join a competitor then the employer may wish to remove the employee from the workplace and minimise any risk of misuse of confidential information before they leave. Placing the employee on garden leave also means that the employee continues to owe their employer obligations as an employee such as acting in the best interests of the business and not performing work for any other employer.
In other cases, the employer may not wish for the employee to remain in the workplace but would like them to perform a handover. The employer can therefore require that an employee be on garden leave but that they must attend work only for the purposes of providing the handover.
The right to place an employee on garden leave generally arises from a contractual arrangement. Employers who consider garden leave to be an attractive option for managing an employee during their notice period should ensure that the termination provisions of the employee’s employment contract allow the employer to direct the employee to take garden leave during their notice period.
Of course, the downside of placing an employee on garden leave during their notice period is that they are effectively being paid their normal remuneration to do nothing. This could mean spending a significant amount of money for a lengthy period of time.
The Barrett/Sea Eagles situation is a good reminder for employers to ensure that, when drafting employment contracts at the commencement of the employment relationship, consideration is given to the practical effect of how any termination will actually play out – particularly ‘garden leave’ clauses and the reasonableness of notice periods.
Careful contract clause drafting will also minimise the risk of any uncomfortable situations at the end of the employment relationship.
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