Gardening Leave In New Zealand: Meaning, Employee Rights & Contract Clauses

If you employ staff, there may come a time when you need someone to stop working immediately - but you also need them to stay employed (and keep their obligations) until their notice period ends.

That’s where gardening leave can be a useful tool for small businesses in New Zealand.

Used properly, gardening leave can help you protect client relationships, confidential information, pricing, systems and team stability during a resignation, termination, or business sale. Used badly, it can create disputes, trigger personal grievances, or lead to pay and process issues you didn’t see coming.

Below, we break down what gardening leave is, how it can work in NZ, employee rights you need to keep in mind, and the key contract clauses that make gardening leave practical and enforceable.

What Is Gardening Leave (And When Might You Use It)?

Gardening leave is when an employee remains employed and paid during their notice period, but you direct them not to attend work or not to perform their usual duties.

They’re still an employee, which means their employment terms generally continue to apply - including duties of good faith and confidentiality. But they’re effectively “out of the business” day-to-day while their employment runs out.

As a business owner, you might consider gardening leave when:

• A key employee resigns (especially sales, account management, management, IT or finance roles).
• You’re concerned about confidential information leaving the business (client lists, pricing, supplier terms, marketing strategies).
• There’s a risk to client relationships (for example, an employee might take customers with them).
• You’re managing a termination and want the employee to be out of the workplace immediately (but still paid while notice runs).
• You’re selling your business and want continuity and risk management during handover.

Gardening leave is not a “free pass” to sidestep NZ employment law - but it can be a legitimate way to manage risk if it’s handled fairly and supported by the right documents.

Is Gardening Leave Legal In New Zealand?

Gardening leave isn’t a separate concept set out in one specific NZ statute, but it can be lawful as part of an employment relationship - provided you manage it consistently with:

• the Employment Relations Act 2000 (including the duty of good faith),
• the employment agreement (what you and the employee have actually agreed to), and
• a fair process (particularly if it’s linked to termination or disciplinary steps).

In practice, gardening leave is usually safest where your Employment Contract clearly allows you to:

• direct the employee not to attend work (or not to carry out certain duties) during their notice period, and
• set reasonable conditions during that time (for example, being available by phone, returning property, not contacting clients).

If your agreement doesn’t deal with it, you can sometimes negotiate a gardening leave arrangement with the employee. However, “directing” gardening leave without contractual support can be risky and may become a dispute about whether you’ve acted unjustifiably or changed terms unilaterally.

When in doubt, it’s worth getting advice early, because the right approach can depend on the specific facts (role seniority, reason for exit, notice period length, and what the employee has access to).

Employee Rights During Gardening Leave (What You Still Need To Do)

One of the most common mistakes we see is thinking that gardening leave means the employee is “basically gone” so the normal rules don’t apply anymore.

In NZ, if an employee is on gardening leave, they’re still employed. That means many of their rights and entitlements continue (although the details can vary depending on the employment agreement and the circumstances).

They Still Need To Be Paid (Usually Their Normal Pay)

Because the employment relationship continues, you’ll generally need to keep paying the employee their usual wages/salary for the notice period, unless the employment agreement lawfully provides otherwise.

If you stop paying, reduce pay, or shift them to a different pay basis without agreement, you can create wage arrears issues and employment disputes very quickly.

In some cases, employers explore alternatives like payment in lieu of notice (where the employment ends sooner but you pay out the notice period instead). Whether you can do that depends heavily on what your contract allows and whether the process is fair.

They May Keep Accruing Leave Entitlements

Because they’re still employed, employees on gardening leave will usually continue to accrue entitlements like annual leave - but this can depend on their employment terms and how leave and final pay are handled in practice.

This matters for budgeting and for final pay calculations if the employee leaves with leave owing.

You Still Owe Duties Of Good Faith

NZ employment relationships are governed by a duty of good faith. Even if you believe the employee is leaving to join a competitor, you still need to act fairly, communicate properly, and not mislead or behave in a way likely to damage the relationship unnecessarily.

Gardening leave should be used for legitimate business reasons - not as a punishment or retaliation.

They May Still Need To Be Contactable

It’s common for gardening leave clauses to say the employee must remain available during normal business hours to answer questions, assist with handover, or participate in exit processes.

This needs to be reasonable. You can’t direct someone not to attend work and then expect them to effectively work full-time from home without clarity and agreement.

They Still Have Confidentiality Obligations

Even without a special clause, employees often have obligations around not misusing confidential information. But your position is much stronger when the contract clearly defines what “confidential information” includes and what the employee must do on exit.

If your business handles customer or employee personal information, you should also make sure your internal processes align with the Privacy Act 2020 - including access controls and offboarding. Having a clear Privacy Policy can help, but employment-specific confidentiality should also be covered in your employment documentation.

How Does Gardening Leave Compare To Notice, Stand-Down, Suspension Or Payment In Lieu?

These terms can get mixed up, especially when you’re trying to move quickly after a resignation or workplace issue. But they’re not the same - and choosing the wrong one can cause real legal headaches.

Gardening Leave vs Notice Period

Gardening leave is typically a way of using the notice period without having the employee actively working in the business.

The notice period still runs. Employment still continues. The main difference is you’re limiting attendance and/or duties.

Gardening Leave vs Stand-Down

A “stand-down” can refer to an employer directing an employee not to work in certain situations (often for operational reasons). In NZ, whether a stand-down is permitted, and whether it is paid or unpaid, will usually depend on the employment agreement and the circumstances.

If you’re considering a stand-down approach (for example, due to business disruption), it’s worth understanding what is and isn’t permitted. The concept is discussed in more detail in our guide to employee stand down.

Gardening leave is usually tied to an exit (resignation/termination) and notice period management rather than operational downtime.

Gardening Leave vs Suspension

Suspension is often linked to an investigation or disciplinary process. It has its own fairness and process risks, and should generally be treated as a serious step.

Gardening leave is different: it’s usually not about misconduct investigations, but about risk management while someone exits.

Gardening Leave vs Payment In Lieu Of Notice

Payment in lieu ends the employment earlier and pays out the notice instead.

Gardening leave keeps employment alive until the end of the notice period - which can be useful if you want post-employment restraints to start later, or you want to keep the employee bound by employment obligations during the notice period.

However, paying in lieu can sometimes be cleaner if you need a fast exit and the contract supports it. Either way, the key is getting the contractual basis and process right.

Key Gardening Leave Clauses To Include In Your Employment Agreement

If you want gardening leave to be a realistic option (instead of a last-minute scramble), you’ll usually need the right wording in your employment documents.

Here are the clauses and drafting points that commonly matter.

1. A Clear Right To Place The Employee On Gardening Leave

Your agreement should spell out that you can direct the employee not to attend the workplace and/or not perform duties during the notice period.

Common drafting points include:

• Whether gardening leave can be used for resignation, termination, or both
• Whether duties can be reduced or changed during leave
• Whether the employee must remain available during business hours
• Whether the employee can be required to work on handover tasks (limited and reasonable)

If you don’t have this written down, you may still negotiate it - but negotiation is very different to a contractual right, especially if the employee is upset or heading to a competitor.

2. Company Property Return And Access Removal

When gardening leave starts, you’ll often want the employee to return business property and stop accessing your systems.

A strong employment agreement usually covers:

• return of laptops, phones, keys, vehicles, tools, swipe cards
• return of documents and records (physical and digital)
• requirements not to delete, copy, or retain business information
• consent and expectations around disabling accounts, email forwarding, and access permissions

This is also a practical cybersecurity step - not just a legal one.

3. Confidentiality Clauses That Actually Match Your Business

A confidentiality clause shouldn’t be vague or generic. For small businesses, confidentiality is often where the value is: your pricing, suppliers, client needs, service delivery methods, sales pipeline, and marketing strategy.

Ideally, your contract defines:

• what confidential information includes (with examples relevant to your industry)
• what the employee can and can’t do with it
• how long confidentiality obligations last (often continuing after employment ends)

It also helps to align confidentiality with broader business documentation. For example, if you use contractors, make sure the confidentiality position is consistent across your contractor arrangements too (classification issues can create additional risk - see our overview of contractor vs subcontractor considerations).

4. Restraint Of Trade (Non-Compete / Non-Solicit) Clauses

Many businesses look to gardening leave because they’re worried about competition risk. Gardening leave can reduce immediate risk, but it’s often paired with restraints - like:

• non-solicitation (not approaching your clients/customers)
• non-dealing (not doing business with your clients, even if approached)
• non-poaching (not trying to recruit your staff)
• non-compete (not working for a competitor in a defined area for a defined time)

In NZ, restraints need to be reasonable and protect a legitimate business interest, otherwise they may be difficult to enforce. A “one size fits all” restraint is a common mistake - especially for junior roles where the restriction can look excessive.

Gardening leave can sometimes reduce how long you need a restraint for, because the employee is already out of the market during notice. But it’s not automatic - your documents should be drafted so these pieces work together.

5. Communication And Client Contact Restrictions

During gardening leave, you may want to restrict an employee from contacting:

• clients and key accounts
• suppliers
• your staff (especially if there’s a risk of disruption)

This can be particularly important in service businesses where the employee is the “face” of the relationship.

To keep things fair, your clause should be targeted - for example, limited to work-related contact, or limited to certain clients.

6. A Process Clause (So You Apply It Consistently)

Even with good clauses, you still need a reasonable process.

Your contract (and internal HR practices) should support:

• how you’ll notify the employee that gardening leave applies
• what happens to commissions/bonuses during the notice period (if relevant)
• handover expectations
• final pay timing and obligations

If you’re scaling up and hiring more staff, putting these protections into a properly drafted Employment Contract (and using it consistently across roles) can prevent arguments later about unequal treatment.

Practical Steps For Employers When Placing Someone On Gardening Leave

Even when you have the right clause, the way you implement gardening leave matters.

Here’s a practical, business-focused checklist you can work through.

1. Check The Employment Agreement First

Before you say anything, confirm:

• the notice period
• whether you have an express gardening leave clause
• whether there are commission/bonus provisions you need to follow
• any restraint of trade terms

If you’re relying on a template or an older contract, it’s worth getting it reviewed - it’s usually cheaper than dealing with a dispute later.

2. Confirm The Reason (And Keep It Legitimate)

You don’t necessarily need to “accuse” the employee of anything to use gardening leave.

But you should be clear internally on the legitimate business reason, such as:

• protecting confidential information
• avoiding workplace disruption
• protecting client relationships
• supporting a clean handover

This helps if the employee later challenges the decision.

3. Communicate The Direction Clearly, In Writing

A written letter/email should cover:

• start date of gardening leave and expected end date (usually the notice end date)
• pay arrangements (confirm normal pay continues)
• whether they must be contactable and what for
• return of property and access changes
• confidentiality reminder and conduct expectations

Clarity now avoids messy misunderstandings later.

4. Manage System Access Immediately

This is one of those “do it now” steps.

• Disable logins and shared passwords
• Remove access to CRM, payroll, finance tools, email, shared drives
• Preserve business records (don’t let anything be deleted)

If you have privacy or sensitive information risks, it can be helpful to ensure your internal policies are aligned with your privacy compliance approach and any incident response planning.

5. Plan The Handover (Without Requiring Full-Time Work)

Gardening leave doesn’t have to mean “no work at all” - it can mean “no client-facing work, no new projects, and limited handover only”.

The goal is usually:

• capture key knowledge
• transfer client relationships to another team member
• reduce risk

Make the handover reasonable and clearly scoped.

6. Consider Whether You Need Other Documents Updated Too

Sometimes an employee exit highlights bigger legal gaps - like unclear ownership of client data, unclear commission terms, or outdated policies.

If you’re reworking your employment documents, you might also consider whether you need a broader workplace policy refresh (especially if you’re growing or bringing in more senior staff).

Key Takeaways

• Gardening leave is when an employee stays employed and paid during their notice period, but you direct them not to work (or limit their duties) to protect your business.
• In New Zealand, gardening leave can be lawful, but it’s safest when your employment agreement clearly gives you the right to place an employee on gardening leave and sets out reasonable conditions.
• Employees on gardening leave are generally still entitled to normal pay and may continue accruing certain entitlements, because they are still employed (depending on the agreement and circumstances).
• Gardening leave is different from stand-down, suspension, and payment in lieu - choosing the right option depends on your contract, the circumstances, and the reason for the exit.
• Strong gardening leave arrangements usually work best alongside well-drafted clauses on confidentiality, return of company property, system access, and (where appropriate) restraint of trade and non-solicitation.
• To reduce risk, communicate gardening leave directions clearly in writing, manage access to systems immediately, and keep any handover requirements reasonable and targeted.

This article is general information only and isn’t legal advice. If you’d like advice on your specific situation, it’s best to get legal help early.

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