Employees who resign or receive notice of termination are often placed on garden leave immediately. Laptop gone. Access rights blocked. Calendar deleted. The internal platform suddenly says “has left the company”, even though the employment relationship may continue for several more months.
Many employers rely on a so-called “garden leave clause” in the employment contract. These clauses typically state that, after notice has been given, the employee may be released from work until the end of the notice period while continuing to receive their salary. The Federal Labor Court has now set limits to this practice.
In its judgment of 25 March 2026, the Fifth Senate held that a standard-form garden leave clause is invalid if it gives the employer a blanket right to release the employee from work during the notice period. Such a clause unreasonably disadvantages employees because it deprives them of the opportunity to assert a particular interest in actually continuing to work in an individual case (BAG 5 AZR 108/25).
The case
The claimant was employed as a regional sales manager in field sales. He had a company car, which he was also allowed to use privately. His employment contract provided that the employer was entitled to release him from work “upon or after notice of termination – irrespective of which party gives notice” while continuing to pay his remuneration.
After the claimant had resigned, the employer placed him on garden leave until the end of the notice period and demanded the return of the company car. The employee returned the car but later claimed compensation for the loss of private use. The Lower Saxony Regional Labor Court awarded him EUR 510.00 gross per month (Lower Saxony Regional Labour Court, judgment of 22 May 2025 – 5 SLa 249/25).
The BAG confirmed that the garden leave could not be based on the contractual clause. The clause was drafted too broadly and was therefore invalid. However, the case has not yet been finally decided. The BAG referred the matter back to the Regional Labor Court, which must now examine whether the employer may have been entitled to release the claimant from work even without a valid clause because, in the specific case, overriding legitimate interests of the employer stood in the way of continued employment.
Paid garden leave is not always an advantage
Employers often present garden leave as a generous solution: the employee no longer has to work but continues to receive their salary.
For many employees, it feels very different.
Anyone who disappears from one day to the next must expect colleagues, customers or business partners to draw the wrong conclusions. Especially for executives, immediate garden leave can create the impression that something serious has happened. This can damage their reputation, even though the employment relationship legally continues.
There are also very practical problems. After garden leave is imposed, access rights are often blocked. The employee can no longer access payslips, bonus documents, share plans, vesting documents, target agreements or company car records. Internal applications can also effectively be cut off if access to the company platform no longer exists.
Particularly in cases involving long notice periods, this is not a minor issue. Anyone placed on garden leave for six months or longer loses visibility, internal contacts and often also the opportunity to apply for other positions within the company.
Employees have a right to continue working
The BAG makes clear that employees do not only have an interest in continuing to be paid. In principle, they also have a constitutionally protected interest in actually being employed. This interest in continued employment remains in place until the employment relationship ends.
This does not mean that every case of garden leave is unlawful. But there must be a reason.
General considerations are not enough. It is not sufficient for an employer to say that it always places employees on garden leave after notice has been given. The employer must be able to explain why, in the specific case, its interests outweigh the employee’s interest in continued employment.
Possible reasons may include concrete indications relating to the protection of trade secrets, a special position of trust, the risk of customer poaching or other legitimate operational reasons. Without such reasons, it will become significantly more difficult in future simply to remove employees from the business until the end of the notice period.
Particularly important for executives
The decision is particularly relevant for executives, sales leaders and specialists.
In these positions, the monthly salary is often not the only issue. Market presence, customer contacts, internal visibility and the continued use of professional skills can be just as important. Someone who is not allowed to work for several months often loses precisely what may be decisive for their next role.
In the previous instance, the Lower Saxony Regional Labor Court expressly took into account that, as a regional sales manager and because of the long notice period, the claimant had a particular interest in continuing to exercise, maintain and develop his professional skills.
The same applies to many managers. In separation situations, garden leave can be a significant pressure tool. It can make applications more difficult, make bonus and share claims less transparent and block access to important documents.
What about the company car?
The case also shows how closely garden leave and company car use are connected.
Many company car policies provide that the car must be returned if the employee is placed on garden leave. However, if the garden leave itself is questionable, the withdrawal of the private right of use may also be problematic.
The BAG has not yet made a final decision on the payment claim. What is clear, however, is this: a company car cannot automatically be withdrawn in every case simply because the employee has been placed on garden leave. The private use of a company car forms part of the employee’s remuneration. If it is withdrawn unlawfully, compensation claims may arise.
Conclusion
A clause that gives the employer a blanket right to place an employee on garden leave after any notice of termination until the end of the notice period is invalid. Employees may not be removed from the business simply because the employment relationship is under notice.
This does not mean that employers can never impose garden leave. But they need a concrete reason. The longer the notice period, and the more the employee depends on visibility, customer contact or internal application processes, the more carefully it must be assessed whether garden leave is truly justified. The “threat” of returning to work can be a useful negotiating lever for executives.
Garden leave after notice should not be too quickly understood as paid time off. It can have significant disadvantages – for reputation, internal job prospects if the employee would still like to stay, remuneration claims, company car use and access to important documents and information.
Please feel free to contact us if you have questions about your garden leave or an upcoming separation situation. You can reach us by e-mail at: mail@rvk.law
