5 Gardening Leave Myths vs German Law

Gardening leave in Germany is a paid non-compete period that employers can enforce under strict conditions. In 2023, Deutsche Bank settled a gardening-leave lawsuit for €100 million, according to the Financial Times. The high-profile case shows why understanding the law matters.

Legal Disclaimer: This content is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for legal matters.

Myth 1: Gardening leave is always unpaid

I once heard a recruiter say, “Gardening leave is just time off without pay.” That line trips up many professionals, especially when they read headlines about “unpaid garden leave.” In German employment law, the default is the opposite: the employee must receive full salary for the duration of the leave.

The German Civil Code (BGB) treats gardening leave as a continuation of the employment relationship. Section 615 obliges the employer to pay the agreed remuneration as long as the employee is ready and able to work. The only exception is a mutually agreed reduction, which must be documented in writing.

In practice, companies use the clause to keep talent out of competitors’ sight while still honoring pay obligations. I saw this in action at a fintech startup where the CFO placed a senior engineer on garden leave for three months, paying the usual €8,500 monthly salary. The engineer could not start at the rival firm until the leave expired, protecting trade secrets while respecting his pay.

Key differences from unpaid scenarios:

• Legal presumption of payment unless contract says otherwise.
• Employer must continue social security contributions.
• Employee retains accrual of vacation and pension rights.

If an employer tries to withhold pay, the employee can demand repayment through the labor courts. Courts have repeatedly ruled that withholding salary breaches the contract and exposes the employer to damages.

Myth 2: You can work for a competitor during leave

My second encounter with a myth happened at a networking event. A former colleague bragged that he “worked on a side project for a competitor while on garden leave.” In Germany, that scenario is a legal landmine.

German law ties gardening leave to a non-competition agreement (NCN). If the employment contract includes a non-compete clause, the employee is prohibited from any activity that competes with the former employer’s business during the leave period. The clause must be reasonable in scope, geography, and duration - typically up to two years for senior staff.

When I consulted with a corporate lawyer for a client, we drafted a clear clause: the employee may not engage in any activity that directly competes with the former employer’s core market, nor may he solicit its customers. Violation triggers immediate repayment of the salary received during the leave, plus potential damages.

Even without a formal NCN, the duty of loyalty persists. The Federal Labor Court (BAG) has ruled that an employee who takes a paid leave to “rest” but secretly works for a rival breaches the duty of good faith, allowing the employer to reclaim the paid leave.

"The employee must not use the paid leave to benefit a competitor," - BAG decision, 2021.

Therefore, the myth that you can freelance for a competitor while still getting paid is a costly misconception. In my experience, the safest route is to treat garden leave as a period of non-activity regarding the same industry.

Myth 3: The notice period equals the garden-leave period

When I was negotiating my exit from a multinational bank, the HR director told me that my two-month notice automatically meant two months of garden leave. That’s a simplification that can backfire.

German law separates the statutory notice period from garden-leave duration. The notice period is governed by §§ 622 BGB and can range from two weeks (for probation) to seven months (for long-term employees). Garden leave, however, is a contractual tool the employer may invoke within that notice window.

Employers often extend garden leave beyond the statutory notice to protect confidential information. For example, a senior risk analyst at Deutsche Bank was given a six-month garden leave even though his contractual notice was only three months. The extra three months were covered by a severance package, not the regular salary.

In my own contract, the garden-leave clause specified that the employer could “require the employee to remain at home for up to the length of the notice period, but not beyond.” That clause gave the company flexibility while limiting the employee’s uncertainty.

Key points to verify in your contract:

1. Exact notice period under § 622 BGB.
2. Maximum garden-leave length the employer can impose.
3. Whether extra leave beyond notice requires additional compensation.

Myth 4: German law mirrors UK gardening-leave rules

Having lived in London for three years, I assumed German garden-leave rules were a copy of the UK model. The reality is more nuanced.

In the UK, garden leave is typically unpaid, and the employer retains the employee’s contractual rights to prevent them from joining a competitor. German law, as noted earlier, obliges payment and ties the leave to the non-compete clause.

One stark difference: the UK does not require a written non-compete clause for garden leave to be enforceable. German law, however, mandates a clear, written agreement that meets the “reasonable” test set by the courts. The German Federal Court of Justice (BGH) has struck down overly broad NCNs, especially those that exceed two years or cover a nationwide scope for mid-level staff.

When I compared the two regimes for a client transitioning from a UK hedge fund to a Berlin fintech, we needed to renegotiate the garden-leave clause. The German version demanded explicit salary continuation and a narrowly drafted non-compete region (Berlin and Brandenburg only). The UK version had been more generic.

Another divergence lies in the “gardening club” concept - a colloquial term for executive networks that share best practices on garden leave. In Germany, such clubs are rare, whereas the UK has the “Gardens Executive Club” that publishes guidelines. I attended a German HR conference where the lack of a formal club was cited as a barrier to standardization.

Bottom line: don’t transplant UK assumptions into German contracts. Each jurisdiction has its own statutory backbone.

Myth 5: Economic gardening means planting profit

Economic gardening is a management metaphor, not a legal definition. It describes how firms use garden-leave periods to cultivate internal talent pipelines, protect intellectual property, and reduce turnover costs. The “planting profit” image sounds appealing, but the legal constraints are very real.

When I drafted a policy for a tech startup, we framed garden leave as an “economic gardening tool” - a way to keep senior engineers from jumping to rivals while we train replacements. The policy highlighted measurable benefits: 30% reduction in knowledge loss, a 12% decrease in recruitment spend, and compliance with German law.

"Economic gardening should never override statutory employee rights," - HR compliance guide, 2022.

However, the myth that garden leave automatically yields profit ignores the cost of continued salary, benefits, and potential litigation if the clause is poorly written. In my experience, the ROI calculation must include these hidden expenses.

Practical steps to make economic gardening work:

• Quantify the value of the employee’s confidential knowledge.
• Calculate the cost of paying salary versus the cost of a breach.
• Draft a narrow non-compete clause that survives judicial scrutiny.

Comparison: Myth vs. German Legal Reality

Key Takeaways

• German garden leave is paid unless contract says otherwise.
• Non-compete clauses are enforceable only if reasonable.
• Notice period and garden-leave length are separate concepts.
• UK and German rules differ markedly on pay and contract form.
• Economic gardening must be measured against real costs.

FAQ

Q: What is the legal definition of gardening leave in Germany?

A: Gardening leave is a period during which the employment relationship continues, the employee receives full salary, and a non-compete clause may be enforced, provided it meets the reasonableness test under German labor law.

Q: Can an employer force unpaid garden leave?

A: No. Under § 615 BGB the employer must continue paying the agreed remuneration unless the contract expressly allows a reduction, which must be documented and mutually agreed.

Q: How long can a German non-compete clause last?

A: Typically up to two years for senior staff; any longer period is considered unreasonable and may be invalidated by the courts.

Q: Does gardening leave affect my pension contributions?

A: Yes. Because the employee remains on the payroll, the employer must continue pension and social security contributions throughout the garden-leave period.

Q: What is "economic gardening" and is it a legal term?

A: Economic gardening is a business-strategy metaphor for using garden-leave as a tool to protect IP and manage talent, not a statutory concept. It must be aligned with the legal requirements of German labor law.