It is not every day that the City of London exports an idea to Wall Street. But a foible of European labour markets has crossed the Atlantic: US bankers who change jobs are more likely to take time off and tend their gardens.
Gardening leave is the practice of forcing employees to spend time out of financial or other markets before moving to a new employer. The period of enforced absence can last as long as 12 months; staff who resign leave immediately and spend their notice period lounging around on full pay.
James Davies, an employment partner at law firm Lewis Silkin, said gardening leave was widespread in the City of London, where it was popularised in the late 1980s. He said UK bankers typically took three months out for weeding or pruning - or sailing the Caribbean.
Enforced idleness is anathema in the US, where labour relations are based on the principle of "at-will employment". Ed Friedman, a lawyer at Friedman Kaplan Seiler & Adelman in New York, said the at-will principle enabled employers and employees to part company at a moment's notice.
He said: "An employee can resign at any time and a company can terminate an employment contract at any time. A few years ago, most Wall Street contracts were at-will contracts."
Not any more. Recruiters said gardening leave was taking Wall Street by storm. Mike Karp, a co-founder and director of Options Group, an international executive search company, said: "It's something that has always been around in Europe but has only just started in New York."
Mark Kurman, a director in the human resources division at Barclays Capital in the US, said the concept had percolated through the American market over the past few years. "Professional courtesy used to dictate that someone gave two weeks' notice but, over the past two to three years, the practice of taking several months' gardening leave has escalated," he said.
Friedman said: "We use gardening leave as a colloquial term to mean either time spent out of the market due to notice periods, or to non-compete clauses." He said US notice periods were 30 to 60 days and non-compete clauses, which forbid employees from joining a competitor for a specified period, could last a further 60 days after employment ends. Like their counterparts in London, Wall Street bankers can find themselves twiddling their thumbs for three months or more.
Recent moves reflect the new reality. The Daily Deal reported that Richard Lieb, former head of Goldman Sachs' real estate investment banking group, spent three months out of the market before joining Greenhill in April. Morgan Stanley said it had hired Eileen Murray from Credit Suisse First Boston in July but she starts work there this month.
Gary Goldstein, chief executive of the Whitney Group, a financial services executive search firm, attributed the spread of gardening leave to mergers within banking. "There are fewer banks for high-quality people to go to. If you're leaving for a competitor, a bank will want you out of the market for three months so it can go after your clients," he said.
Friedman said the practice made its appearance in the US following the large-scale financial services redundancies of 2002, when the lack of jobs meant bankers were powerless to dispute arcane elements of their employment contracts. "Individuals had less bargaining power and it led to a shift in the way contracts were put together," he said.
Recruiters also point the finger at European banks. Joe McCann, managing director of New York search firm JH McCann, said Deutsche Bank, UBS and Credit Suisse had popularised the practice on Wall Street, while Karp said European banks had always put US staff on gardening leave and local rivals were following their lead.
Kurman said: "The world is a more competitive place and no one wants to be in a position where their human capital can walk away the next day. US banks recognise that gardening leave is used across the ocean and they should import it."
The spread of the practice has affected the way search firms work. McCann said the leave usually applied to vice-presidents and directors and could be hard to enforce at more senior levels. While mid-ranking employees stay at home, top staff negotiate a reduction in the time spent out of the market in return for not hiring former colleagues.
Goldstein denied the practice has injected European sclerosis to the otherwise-fluid Wall Street job market. If anything, he said, the spread of gardening leave had encouraged banks to consider hiring when they would previously have delayed.
He said: "Firms that would previously have sat tight until bonuses are paid in January are being forced to think about hiring now instead. If they wait until bonuses are paid and gardening leave has finished, they might not be bringing people on board until June or July. It's creating an interesting dynamic."