What is a garden leave clause?

Counteroffer · Answers · non-compete Source: https://trycounteroffer.com/answers/garden-leave-clause

Short answer: Garden leave is a clause where the employer pays the employee during the non-compete restricted period, effectively buying out the non-compete with continued compensation. Required by Massachusetts (50% of base salary during restriction) for most enforceable non-competes signed after October 2018. Used voluntarily in some senior executive arrangements. The compensation makes the non-compete enforceable that would otherwise lack consideration; it also means the employer must pay for the protection it's getting.

How garden leave works

Garden leave is a period during which the employer continues to pay the employee (typically 50-100% of base salary) in exchange for the employee being unable to compete. The employee may or may not have any actual duties; sometimes they're put on leave with pay until the restriction period ends.

The arrangement serves two purposes:

Provides consideration that supports an otherwise unsupported non-compete
Creates real economic cost for the employer, which prevents over-aggressive enforcement

For senior executives, garden leave is sometimes 3-12 months of full base salary plus continued benefits. For ordinary employees in Massachusetts (where it's statutorily required), it's 50% of highest base salary in the 2 years before separation, for the full restriction period.

Where garden leave is required

Massachusetts explicitly requires garden leave (or other mutually agreed consideration) for non-competes signed after October 1, 2018. Without garden leave or specific other consideration, the non-compete is unenforceable.

The required amount: at least 50% of the employee's highest base salary in the 2 years before separation, paid during the restriction period.

Most Massachusetts non-competes use the "other mutually agreed consideration" option (such as a signing bonus or equity grant) rather than paying garden leave, but the option remains.

Washington requires garden leave equal to the employee's full base salary if the employer wants to enforce a non-compete against a laid-off employee. This effectively prevents enforcement of most non-competes against laid-off Washington employees because the cost is too high.

Oregon allows garden leave (at least 50% of annual base) as an alternative to the salary threshold, letting an employer enforce a non-compete against an otherwise-threshold-failing employee by paying.

How garden leave is used voluntarily

Outside of states that require it, garden leave is sometimes used voluntarily by employers and employees in senior executive arrangements:

CEO and C-suite separations: Garden leave allows the executive to maintain compensation through a transition period while bound by non-compete. Common for 6-12 months.
Financial services: Industry tradition (especially in UK-influenced practice) involves garden leave for senior bankers and traders.
Sales executives: Garden leave during the customer non-solicit period can be used to prevent immediate competitive harm.
Senior product leaders: For executives who would face significant competitive harm from rapid transition.

When used voluntarily, garden leave is typically structured as continued employment status with no duties, full compensation and benefits, and an obligation not to compete.

Garden leave vs traditional non-compete

Feature	Traditional non-compete	Garden leave
Restriction	Employee bound, no compensation	Employee bound, full or partial compensation
Employer cost	Free (legally questionable)	Significant cash cost
Enforceability	Often challenged on consideration grounds	Typically clean on consideration
Practical use	Common but often unenforceable	Less common but more durable
Sustainability	Hard to enforce if employee challenges	Easier to enforce

Garden leave is the more expensive but more reliable form of the same protection. For employers that genuinely need post-employment restrictions (e.g., to protect customer relationships during transition), paying garden leave is more honest and more enforceable than relying on traditional unpaid non-competes.

Negotiating garden leave

If you're in a state where garden leave is required (MA, WA, OR), the question for negotiation is whether the employer is offering garden leave at the statutory minimum or above:

MA: Push for 75-100% of base salary (statutory minimum is 50%); push for full benefits continuation; push for accelerated vesting on equity during the leave period
WA: For laid-off employees, the threshold makes enforcement expensive; employers usually waive the non-compete rather than pay; if they offer garden leave, push for 100% and benefits
OR: If you're under the salary threshold and the employer wants to use garden leave, push for above-threshold compensation

If you're negotiating an executive package outside required-garden-leave states, garden leave can be a useful negotiating tool:

"I'll accept the 12-month non-compete if you provide garden leave at 75% of base for the restriction period."

This converts an unpaid restriction into a paid transition. The employer either accepts (you get compensation) or backs off the non-compete (you're free to compete).

What to do next

If your non-compete is in a garden-leave state or you're negotiating an executive package involving post-employment restrictions, a delivered analysis can identify what's required and what's negotiable. We deliver one in 24 hours for $199. See Non-Compete Review.

Sources

Mass. G.L. c. 149 § 24L (Massachusetts garden leave requirement)
RCW 49.62 (Washington garden leave for laid-off employees)
ORS 653.295 (Oregon garden leave option)

Get your contract reviewed

If you want a delivered review of your specific document with cited authority and counter language, see https://trycounteroffer.com/non-compete.

Last updated: Sun May 31 2026 00:00:00 GMT+0000 (Coordinated Universal Time)

Counteroffer is a contract analysis service, not a law firm. This page is informational, not legal advice.