Getting paid to keep secrets

Johannesburg - When Gill Marcus takes over the reins as governor of the Reserve Bank next week, incumbent Tito Mboweni is set to start at least six months of gardening leave.

Gardening leave is becoming more commonplace and describes the practice of keeping an employee who has already left a company on its payroll.

According to Paul Rademan, chairperson of law firm Wright Rose-Innes, this practice is used to prevent trade secrets or confidential information being passed on to competitors, or to prevent the employee from setting up a rival firm.

While receiving pay, employees are bound to all contractual clauses until their notice period expires.

"It is common practice for companies to have a restraint of trade on individuals with specialist knowledge in the field in which the company conducts business," said Rademan.

"Thus the individual with expertise would be given an amount of money preventing him from directly competing with the company, or using his expertise in another company that directly competes with his previous employer."

Rademan said there is talk of introducing legislation to prevent director generals of certain departments from joining private sector companies once their term of office expires.

He said there is an unfair advantage if confidential information is passed on for financial gain to the private sector by a public official.

The length of leave depends entirely on the particular industry involved. For instance, a six-month period might suffice in the IT sector where new developments happen quickly, said Rademan.

Higher positions and greater confidential knowledge would enable employees to negotiate higher salaries, while companies may require longer restraint of trade or gardening leave periods.

- Fin24.com