Thomson Reuters Practical Law has released the 2026 update to “Garden Leave Provisions in Employment Agreements,” co-authored by Peter A. Steinmeyer and Lauri F. Rasnick, Members of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Chicago and New York offices, respectively.
The Note discusses garden leave provisions in employment agreements as an alternative or a companion to traditional employee non-compete agreements. It addresses the differences between garden leave and non-compete provisions, the benefits and drawbacks of garden leave, and drafting considerations for employers that want to use garden leave provisions. This Note applies to private employers and is jurisdiction neutral.
Following is an excerpt (see below to download the full article in PDF format):
In recent years, traditional non-compete agreements have faced increasing judicial scrutiny, with courts focusing on issues such as the adequacy of consideration, the propriety of non-competes for lower level employees, and whether the restrictions of a non-compete are justified by a legitimate business interest or are merely a tool used to suppress competition.
Although federal rulemaking efforts to ban non-competes in 2024 were unsuccessful and have been abandoned by the second Trump administration, the Federal Trade Commission (FTC) continues to scrutinize non-competes as potential antitrust violations on an individual basis. Momentum also continues at the state legislative level to pass laws regulating and often restricting non-competes in various ways. Several states have passed legislation essentially banning non-competes for low-wage workers (see Practice Note, Non-Compete Agreements with Employees: Limitations on Non-Competes with Low-Wage Workers).
Other states have limited non-competes for other categories of workers, such as technology sector workers and health care professionals (see Health Care Non-Compete State Law Chart: Overview). Massachusetts passed comprehensive non-compete legislation in 2018 limiting the enforceability of most non-compete agreements (see Statutorily Required "Garden Leave"). In other states, including California, North Dakota, Oklahoma, and Minnesota, almost all post-employment non-competes are unenforceable (Cal. Bus. & Prof. Code § 16600-16602.5; N.D.C.C. § 9-08-06; Okla. Stat. tit. 15, § 217; Minn. Stat. Ann. § 181.988). Wyoming recently enacted a ban on most post-employment non-competes, though with somewhat broad exceptions, effective July 1, 2025 (Wy. Stat. Ann § 1-23-108). Illinois, Colorado, and the District of Columbia also have enacted or amended their non-compete statutes to limit the enforceability of non-compete covenants, although the Illinois law expressly excludes garden leave clauses from its definition of covenants not to compete (820 ILCS 90/5, 90/10 and 90/15, as amended; Colo. Rev. Stat. Ann. § 8-2-113; D.C. Code §§ 32-581.01 to 32-581.05) Bucking this trend, Florida has taken a contrary approach and enacted a law providing enhanced
protections for employers seeking to enforce certain restrictive covenants with employees covered by the law (see Florida CHOICE Act).
This Practice Note addresses:
- The history and general characteristics of garden leave in the US.
- Comparisons between traditional non-competes and garden leave provisions.
- Case law addressing garden leave provisions.
- Advantages and disadvantages of garden leave.
- Drafting considerations for employers that want to use garden leave provisions, including potential issues under:
–– Section 409A of the Internal Revenue Code (Code); and
–– the Consolidated Omnibus Budget Reconciliation Act (COBRA).
Download the full Practice Note in PDF format: "Garden Leave Provisions in Employment Agreements—2026 Update"