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Employee Awarded $300,000 for Breach of Implied Terms

Friday, March 22, 2013

Between January 2002 and March 2005, a Farm Manager was employed by a company (‘the Employer’).  The Farm Manager was paid $30 per hour and received 4 weeks annual leave.  The Farm Manager’s contract did not contain an express provision regarding termination of employment.

The Farm Manager’s employment was terminated in March 2005 and the Farm Manager was not paid any notice in lieu of termination.  The Farm Manager argued that he was entitled to reasonable notice and that such reasonable notice was implied into his contract.  The Farm Manager argued that he was entitled to 3 months’ notice while the Employer argued that he was entitled to 1 months’ notice. Agreeing with the Farm Manager, Justice Robert Beech of the Supreme Court of New South Wales held:

“[The Farm Manager] was 53 years of age at the time he was dismissed. He had worked in the position for almost three years.  The position was a relatively senior one in that he was managing a substantial commercial enterprise.  His position had considerable autonomy in that he was only accountable to [the Farm Owner] and, to a lesser extent, [the Chief Financial Officer].  In those circumstances I consider that the three month claim made on his behalf is established.”

The Farm Manager also argued that he had an oral contract with the Employer which included an implied term that upon termination of employment the Farm Manager would be reimbursed by the Employer for using his 2 tractors at the rate of $60 per hour. Although the Employer denied this, Justice Beech agreed with the Farm Manager stating:

“While there is room for debate about the amount of hours the tractors were used, I consider the evidence that there was a significant amount of usage of [the Farm Manager’s] tractors on [the Farm] during the years 2002 to 2005 to be overwhelming.  I regard the objective likelihood that [the Farm Manager] allowed his tractors to be used on [the Farm] without some agreement that he would eventually be reimbursed to be low.”

This case highlights the importance of formalising all agreements with employees, especially senior ones, so as to avoid confusion and lengthy and expensive Court proceedings required to determine what an employer and employee had actually agreed to.

If you would like advice on formalising negotiations with employees or prospective employees, please contact Nick Stevens, Victoria Sales or Liza Isho.

Author: Nick Stevens
, Principal, Stevens & Associates Lawyers, an AIIA.biz expert and one of the Panel of Expert Bloggers.

This article provides general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Stevens & Associates Lawyers is a boutique industrial relations and employment law firm. It has liability limited by a scheme approved under Professional Standards Legislation.

High Profile Stockbroker Poaching Case Redefines 'Confidential Information'

Monday, November 05, 2012
A recent case before the Supreme Court of New South Wales has held that a financial services company is liable for luring financial advisors (‘the Advisors’) to commence employment at that firm (‘the New Employer’) and inducing them to breach their employment contracts by disclosing confidential revenue information of their former employer (‘the Former Employer’).

Her Honour Justice Patricia Bergin held that in the process of recruiting five Advisors in July of this year, the New Employer had induced two of those Advisors to breach the confidentiality clauses of their existing employment contracts with the Former Employer by seeking details of the Former Employer’s earnings and revenues (‘the Confidential Information’), and also by requesting that the Advisors set up meetings between a group of up to 23 advisors and the New Employer, with a view to making them offers of employment.  This also constituted a breach of the Advisors’ fiduciary duties to their Former Employer, and their express contractual obligations to refrain from “intentionally [doing] anything which is or may be harmful to [the Former Employer].”

Her Honour found that despite the lack of any direct reference to ‘revenue information’ in the Advisor’s confidentiality clauses, such information was encompassed within the broader expression ‘information relating to [the Former Employer’s] business affairs. Also relevant was the fact that the Advisor’s employment contracts specifically made remuneration details ‘confidential’, and it was accepted that the Advisor’s remuneration was at least partially based upon the revenue they themselves generated for the Former Employer. Notwithstanding that the New Employer would have known that the Former Employer would have contractual obligations in place to protect its confidential business information, the Court heard that the New Employer, on the basis of the Confidential Information obtained, offered to employ the Advisors as a team and provide a more attractive remuneration than that provided by the Former Employer. The stipulation by the New Employer that the Advisors maintain secrecy throughout the process of communications was found to infer an intention to damage the Former Employer’s earning capacity.

Justice Bergin rejected the argument that the clause amounted to an unreasonable restraint of trade, noting that the Former Employer had a legitimate interest in ensuring the stability of its workforce, and that the New Employer (having been engaged in discussions over a potential merger with the Former Employer earlier in the year) ought reasonably to have known that inducing the mass exodus of 23 of its employees would harm its commercial interests. Her Honour noted that the fact that the Advisors had already begun to consider leaving their employment with the Former Employer did not relieve the Advisors of their confidentiality obligations, highlighting the distinction between having a desire to leave and “taking the step of leaving”. Justice Bergin also discussed the marked difference between an individual deciding to leave his or her employment, and a deliberate effort to transfer a work team to a competing organisation.   

The lesson for business employers arising out of this case is to ensure that confidentiality clauses, particularly for employees in senior positions, are drafted in broad terms. Specifically, the confidentiality clause should be directly inclusive of information pertaining to remuneration, revenue, commission statements and general business affairs.

For further information on drafting effective confidentiality clauses in employment contracts for your employees, please contact Nick Stevens, Victoria Sales or Liza Isho

Author: Nick Stevens, Principal, Stevens & Associates Lawyers, an AIIA.biz expert and one of the Panel of Expert Bloggers.

This article provides general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Stevens & Associates Lawyers is a boutique industrial relations and employment law firm. It has liability limited by a scheme approved under Professional Standards Legislation.



Employee Compensated after being Terminated for assisting a Former Co-worker with their Unfair Dismissal Claim

Friday, September 21, 2012
A recent decision on appeal to the Full Bench of Fair Work Australia (‘FWA’) has found an employer liable to pay compensation to a former employee for terminating his employment contract on the grounds that he assisted a former co-worker with their unfair dismissal claim against the employer.

After holding meetings and exchanging various correspondence, the employer terminated the employee’s employment with immediate effect, providing for five weeks pay in lieu of notice. The employer stated that the termination was related to the employee’s conduct with the former co-worker, alleging that he had been “grossly disloyal” for assisting the co-worker with his unfair dismissal claim.

The former employee had sent an email to the co-worker, upon the co-worker’s request, listing the names of employees who the employer had recently made redundant as a result of an alleged financial error by the co-worker. The co-worker had requested this list so as to contact these individuals and explain that those redundancies were not a result of any mistake or wrongdoing by the co-worker. The employer alleged this list amounted to confidential information, and the disclosure of the same by the former employee was grossly disloyal and warranted termination of employment.

At first instance, Senior Deputy President Hamberger accepted that “gross disloyalty…can in certain circumstances, constitute a valid reason for dismissal” but in this case, it was not “substantiated on the evidence” and therefore the termination violated section 385 of the Fair Work Act 2009 (Cth) (‘the Act’). Amongst other criteria, section 385 of the Act states that a dismissal is ‘unfair’ if it is “harsh, unjust or unreasonable”. SDP Hamberger found that the employee had not engaged in gross disloyalty, being the disclosure of confidential information, but rather was “particularly concerned about his co-worker”.

The decision at first instance was upheld on appeal to the Full Bench of FWA, who found that SDP Hamberger had not incorrectly decided that the termination was “harsh, unjust or unreasonable”. The Full Bench found that the employer had failed to establish that the decision at first instance possessed a “demonstrable error”.

If you would like advice on managing unfair dismissal claims or protecting confidential information, please contact Nick Stevens or Liza Isho.

Author: Nick Stevens, Principal, Stevens & Associates Lawyers, an AIIA.biz expert and one of the Panel of Expert Bloggers.

This article provides general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Stevens & Associates Lawyers is a boutique industrial relations and employment law firm. It has liability limited by a scheme approved under Professional Standards Legislation.

Are you investor/sale ready? Part 1 - IP and other goodies

Friday, June 22, 2012

If your end game is to interest an investor in your business or to sell your business, think about putting in place systems now to ensure you achieve the best possible outcome.
 
Successful sales don’t just happen.  As with many things in life, from passing an exam to baking a cake, preparation is everything!  Attention to detail will highlight your success not problems.  The earlier you get your affairs in order, the easier it will be to maintain your records and be investor/sale ready.
 
This 2 part blog looks at some of the issues you need to be thinking about now if you want to sell your business or take on an investor in the future.  This blog focuses on your most important assets – IP and confidential information.  The second blog is about record keeping - I see you yawning but it is important!

IP is the life blood

For most companies, especially those in the technology industry, intellectual property is the foundation of the value of the business. Your ability to show an audit trail of the creation of your IP could be critical to finding an investor or buyer or obtaining the best price. 

Some tips to track and protect your IP:

  • keep a register of all individuals (employees and contractors) involved in developing your IP and what specifically they have developed - an excel spreadsheet is better than nothing!
  • have watertight employment contracts
  • get all contractors to assign all IP they create to you in writing
  • obtain moral rights consents from all developers
  • if you incorporate licensed third party IP (including open source software), keep records of this and the licence agreements applicable
  • ensure that any third party licences allow you to commercialise your IP without restrictions
  • be aware of any restrictions on the use of the third party IP
  • record and register any trade marks you use to differentiate your products or services – make sure you check the availability of a trade mark before you use it to ensure you are not infringing.

Are your secrets safe?

  • make sure that any person accessing your IP, confidential or proprietary information (trade secrets) is under strict obligations of non-disclosure that are evidenced in writing.  Trying to put these in place retrospectively can be extremely problematic and sends a worrying signal to a potential investor/buyer 
  • only share company information with a potential investor/buyer once a non-disclosure or confidentiality agreement is in place
  • have a clear policy about the proper use of trade secrets and make sure your people are aware of it
  • clearly mark information “confidential” when it is
  • maintain strict controls over your trade secrets to ensure they are not accessed by unauthorised people or inadvertently disclosed.

Pym’s Technology Lawyers has assisted many companies with preparing for sale and capital raisings including doing due diligence, shareholders’ agreements and IP protection. 

Author: Peta Maloney, Director, Pym’s Technology Lawyers. A member of the Panel of Expert Bloggers on commun-iT and an expert on www.aiia.biz.
 
Disclaimer: This is general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Pym’s Technology Lawyers Pty Ltd is a specialist IT and commercial law firm. It has liability limited by a scheme approved under Professional Standards Legislation.

Two-year Restraint of Trade Clause found to be Reasonable

Monday, May 28, 2012

A recent case in the Federal Court of Australia has found a two-year employment restraint clause to be valid and reasonable.  The employee commenced employment in 2005 with a Human Resources strategy and consulting business, giving two months written notice in July 2011 as per an Executive Service Agreement (‘Employment Agreement’).  Justice Buchanan heard the employee was considered as extremely important to the business, with the employee’s skills of attracting clients akin to “sprinkling fairy dust”.  The employee was “the human face of [the business], who represented [the business] to the customer”.  The Employment Agreement was finalised some months after the employee commenced employment, with contention arising over certain terms, including the length of time the restraint clause would cover.  The employee originally proposed a six month unpaid period.  However the final Employment Agreement was for a term of two years, with all but the first three months paid.  The Employment Agreement also included a clause allowing the employer 14 days to decide whether they wanted the restraint to operate.  This allowed an opportunity for the employer to assess the businesses ability to provide pay over the period and any potential downturn in trade if the clause was not in operation.  The employer elected to enforce the clause.

The employee argued the terms of “Restricted Business” with the phrase “similar to” amounted to an “unlimited global restraint”.  However Justice Buchanan disagreed, commenting that it was reasonable and satisfied s 4(1) of the Restraints of Trade Act 1976 (NSW), which states a restraint of trade clause is valid “to the extent to which it is not against public policy”.  He found in favour of the two-year restraint period for a number of reasons:

  • The restraint clause was negotiated separately, accompanied by specific provisions;
  • Owing to the specific provisions, the clause was clearly of "valuable consideration";
  • No other executive at the business had a similar arrangement; and
  • The two-year period shadowed the businesses cycle whereby clients generally signed two or three year contracts.

 

Author: Nick Stevens, Principal, Stevens & Associates Lawyers, an AIIA.biz expert and one of the Panel of Expert Bloggers.

This article provides general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Stevens & Associates Lawyers is a boutique industrial relations and employment law firm. It has liability limited by a scheme approved under Professional Standards Legislation.


    Employee sacked while on sick leave wins compensation

    Wednesday, May 23, 2012
    A recent case in the Federal Magistrates Court of Australia (‘the Court’) has found than an employer unfairly dismissed an employee while she was on sick leave.

    As the employee’s salary was over the unfair dismissal threshold of $118,100, the employee commenced proceedings under s 352 of the Fair Work Act 2009 (Cth) (‘the Act’). This section prohibits an employer from dismissing an employee for being “temporarily absent from work due to illness or injury” of a type allowed pursuant the Act. An acceptable illness or injury is that which can be proven by evidence, such as a medical certificate.

    The employee had fallen ill and had taken sick leave in compliance with the terms of her employment contract and notified the employer that she would be taking a week of sick leave, and would produce a medical certificate at her first available opportunity. Two days into her sick leave, and before she was able to do provide a medical certificate, the employer summarily dismissed her. Among other reasons, the termination letter stated that the employee “had failed” to keep the employer aware of their “absences”.

    The employer had also refused to provide one month’s written notice as required in the employment contract, alleging that the employee had engaged in either “serious misconduct or wilful neglect”, or another act capable of allowing termination under the employment contract the action of dismissing the employee was unrelated to the employee’s lawful sick leave, or that the conduct of the employee amounted to valid reasons to summarily terminate her employment. Federal Magistrate Smith said that the employer’s “decision was poorly thought through” and the act of summary dismissal itself was “devoid of objective reasonableness and fairness” to the employee.

    The Court ordered the employer be fined $20,000, pay compensation to the employee of more than $37,000 and cover the employee’s legal costs of $57,000.

    For advice on sick leave provisions or termination of employment contact Nick Stevens or Liza Isho.

    Author: Nick Stevens, Principal, Stevens & Associates Lawyers, an AIIA.biz expert and one of the Panel of Expert Bloggers.

    This article provides general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Stevens & Associates Lawyers is a boutique industrial relations and employment law firm. It has liability limited by a scheme approved under Professional Standards Legislation.

    Procure IT v3.0 Service Modules Released

    Wednesday, April 18, 2012
    They were worth waiting for....  NSW Government can now buy ICT services from industry under the new business-friendly standard Government contract - Procure IT version 3.0.  NSW Government has recently published a series of Modules for use with Procure IT v3.0 covering:
    • Contractor Services (body shopping and short term ICT Consultancy under the direction, control and supervision of the buyer)
    • Professional Services (Professional services where the supplier exercises 'professional' judgement)
    • Training Services (as part of a project.  This Module does not cover public classroom based training).
    • Data Migration Services (data migration, data cleansing and analysis).

    Which Government buyers can use it?

    The publication of these Modules enables NSW Government buyers: including NSW Departments, Agencies, Hospitals, State owned Corporations, Local Government and Universities (to name but a few of the 10,000s of 'NSW government entities' that are entitled to use the Procure IT v3.0 contract), to purchase this range of services. 

    ITS 2020

    And publication was just in time, as the extension of one of the NSW Government's major Services panels, ITS 2020, has just occurred and this panel relied on the publication of these Modules in order to be effective.  ITS 2020 approved supplier panel comprises of a diverse range of ICT services, in over 30 categories and 130 sub categories.

    Issues

    There are a couple of legal issues with one of the Modules, Training Services, in that this Module is not referred to in the main Parts of Procure IT v3.0, so amendments will be needed on each order to ensure that the Training Services are subject to the appropriate 'boiler plate' terms and conditions; but overall these Modules represent a significant improvement over the previous versions of Procure IT. 

    Where can I find the version of Procure IT version 3.0

    The new version of Procure IT v 3.0 is published on the NSW Government Procurement website at:http://www.nswprocurement.com.au/Tenders/Goods---Services-Standard-Form-Documents.aspx

    Pym’s Technology Lawyers has been the primary legal adviser to AIIA during the discussions with NSW Government on Procure IT.

    Author: Mike Pym, Director, Pym’s Technology Lawyers.  A member of the Panel of Expert Bloggers on commun-iT and an expert on www.aiia.biz

    Disclaimer: This is general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Pym’s Technology Lawyers Pty Ltd is a specialist IT and commercial law firm. It has liability limited by a scheme approved under Professional Standards Legislation.

     

    Restraint not Effective

    Tuesday, April 10, 2012

    Justice Sifris of the Supreme Court of Victoria (‘the Court’) has allowed a former employee of a company (‘the Employer’) to work for a previous client of the Employer despite a twelve (12) month restraint clause in the employee’s employment contract (‘the Agreement’). The Agreement stated that for a period of twelve (12) months after the employment ended, the Employee would not provide services or accept employment with any client of the Employer to whom the employee dealt with or had cause to be in contact with during his employment with the Employer (‘the Restraint’).

    In February 2011, the employee began to provide services to a client of the Employer (‘the Client’) on a full-time basis. In November 2011, the Client went through a restructure, creating a new position. In December 2011, the Client approached the employee to determine his interest in filling the new position as an employee of the Client and the Employee advised the Client that he was interested.

     In January 2012, the Employee tendered his resignation to the Employer advising he would be taking the new position with the Client. The Employer advised the Employee that this would be in breach of the Restraint.

     In interpreting the Restraint, Justice Sifris held the Restraintpurports to operate to prohibit [the Employee] from providing any of the services normally provided by [the Employer] at the time [the Employee] finished working there to the clients that [the Employee] had actual contact with while [with the Employer] or had demonstrated reasons to be in contact with.”

     The Employer submitted the Restraint was “confined and did not go further than protecting the legitimate interests” of the Employer. Conversely, the Employee submitted that there was no legitimate interest that required protection.

     In determining whether the Restraint was valid and enforceable, Justice Sifris noted that “something more than exposure to or interaction with the customer or client by the employee is required…This would include personal or special knowledge (which may include confidential information) of the client and a significant degree of influence. It should be stressed that the risk of exploitation of such knowledge and connection, which the covenant seeks to protect, must be assessed at the date of the agreement.

     Justice Sifris held the Restraint was “void and unenforceable” finding the nature of the relationship between the Employer, employee and the Client did not place the employee in a “special category that would create the risk of exploitation that required protection by covenant…[the Employee] was not intended to be…the human face of [the Employer] or have the relevant and necessary control over the business of the client. His consultancy position… was not intended or contemplated to provide the basis for the development of a special relationship with the client of the kind that would provide the basis or foundation for later competition or exploitation.”    

    This case highlights the importance of having properly drafted restraint clauses within employment contracts and confirms the issues that will be considered when a Court considers whether a restraint is enforceable. If you would like advice on post employment restraints, please contact Nick Stevens or Liza Isho.

    Author:
    Nick Stevens, Principal, Stevens & Associates Lawyers, an AIIA.biz expert and one of the Panel of Expert Bloggers.

    This article provides general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Stevens & Associates Lawyers is a boutique industrial relations and employment law firm. It has liability limited by a scheme approved under Professional Standards Legislation.

     

     

     

    Avoid a $50,000 fine every time you sell a product or service for less than $40k with a warranty!

    Monday, March 19, 2012

    Many people still do not know about the new Regulation 90 (issued under the Australian Consumer Law), and its impact on suppliers' pricing of warranty services, contracts, websites and warranty cards.

    It applies to all goods and services, not just ICT goods and services.

    Regulation 90 came into force on 1 Jan 2012 and prescribes the form and content of a “warranty against defects”.  A failure to meet the requirements of Regulation 90 can be either a criminal offence or a civil contravention and can result in fines of up to $50,000 for a corporation and $10,000 for an individual per contravention.   In addition, providing incorrect statements about the existence or scope of warranties can result in penalties of up to $1,100,000 for corporations and $220,000 for individuals under other sections in the Australian Consumer Law (also known as the Competition and Consumer Act 2010).

    This Regulation applies to all consumer contracts in Australia, which essentially is any contract for the supply of goods or services where the price is less than $40,000, or the goods or services are for domestic, household or personal use, irrespective of whether the buyer is an individual, a company or even a government body.

    So what is a "warranty against defects"?

    A 'warranty against defects' is any statement given at or about the time of supply of the goods or services to the effect that a person (not necessarily the supplier) will repair or replace the goods or part of them, rectify services or provide them again, or wholly or partly recompense the buyer for defective goods or services. 

    The statement which comprises the warranty against defects could be oral (in which case it needs to be documented) or could be:

    • in your terms and conditions (this includes your standard licence agreement or services contract).
    • if the goods/services are purchased on a website, any statement made on the website.
    • on any ‘warranty card’ that is included with your products.
    • on product packaging, if you provide a warranty against defects on that packaging.
    • at the point of sale, if you provide a statement about warranties at the point of sale.

    What is required?

    Where a ‘warranty against defects’ is given, Regulation 90 must be complied with.  Importantly, the warranty must be in a complying document which includes the exact text highlighted in bold below. 

    'Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure'.

    Presumably due to oversight, this text applies EVEN if you are only selling services despite the wording in Regulation 90 only referring to “goods”.   In addition to providing this text, there are a number of other requirements relating to providing certain pieces of information relating to the identity of the provider of the warranty services, the process of obtaining warranty services, what the service is and what costs are involved.

    Based on our experience in amending IT suppliers contracts to comply with Regulation 90, there are usually at least a dozen specific amendments to be made to any 'standard' contract, and in some cases a significant review of business practices and pricing may also be required.

    The Regulation 90 requirements also apply to both retailers and manufacturers. So if you resell other peoples’ goods and services, and the manufacturer’s terms and conditions, warranty card, packaging or similar have not been updated to comply with the regulation, you may be liable, as well as the manufacturer.

     

    Need Help?

    We would be pleased to assist you to review your current business practices, amend your contracts and/or provide advice in relation to how to become compliant with Regulation 90 and other aspects of the Australian Consumer Law.  For help, please call us on 02 9251 9664. 

    Author: Mike Pym, Director, Pym’s Technology Lawyers.  A member of the Panel of Expert Bloggers on commun-iT and an expert on www.aiia.biz

    Disclaimer: This is general information only. It is not legal advice, and is not a substitute for legal advice. Specific advice should be sought to take into account your particular circumstances. Pym’s Technology Lawyers Pty Ltd is a specialist IT and commercial law firm. It has liability limited by a scheme approved under Professional Standards Legislation.

     

    Can your ex-employee take your customer list and use it to compete with you?

    Thursday, March 08, 2012

    Protecting your Confidential Information: Preventing misuse by former employees

    In a recent decision of the Supreme Court of New South Wales (‘the Supreme Court’), an employee of an accounting firm (where the employee was previously a principal and owner) was liable to provide compensation to the new business owner (‘the New Owner’) after the employee used confidential information to solicit former clients.

    The facts of the case were briefly as follows. The employee sold his accounting firm business to the New Owner, with a agreement in his employment contract that he would refrain from providing accounting services or tax preparation for a period of at least three (3) years within ten (10) kilometres of the accounting firm. At a later date, both the employee and the New Owner agreed that the employee would be released from this contractual agreement a year earlier than originally established (i.e. a two (2) year restraint) in order to allow the employee to expand a previously owned business. During discussions, the employee informed the New Owner that he believed only a “handful” of the New Owner’s clients would follow him to his new business. 

    Upon leaving the accounting firm, the employee and the New Owner agreed that the employee would only approach family members and six (6) clients of the accounting firm, and that “all other clients, including files, lists, working papers etc” would remain the property of the accounting firm.

    After leaving the accounting firm, the employee expanded a similar business nearby, and proceeded to contact and form clients from lists created by the New Owner. The employee sent emails and letters to clients advising more than seven-hundred (700) clients of the New Owner of his new business, providing them with forms to compel the New Owner to transfer their work to the employee’s new business. These mail outs continued to occur over a period of two (2) months. Many of the New Owner’s clients chose to transfer their services to the new business, resulting in a significant loss of trade for the New Owner.

    The New Owner commenced proceedings in the Supreme Court alleging a breach of the employee’s confidential information, and sought to prevent the employee from continuing his new business activities and soliciting the New Owner’s clients. The employee argued that the confidential information, being client information, was merely taken from his memory and therefore did not constitute a breach of his confidential information obligations to the New Owner. However the Supreme Court determined that the employee did use a list of clients obtained from the New Owner whilst having knowledge that this information was confidential to the previous employer. Justice Gzell of the Supreme Court commented “using the wrongdoer principle, I assume that all…clients who left…were solicited by [the employee] using…confidential information”. The Supreme Court held that the employee had misused the confidential information of the New Owner to gain at least seven-hundred and seventy-six (776) clients. On that basis, Justise Gzell determined the employee was liable to pay the New Owner for 75% of the downturn in trade at the accounting firm, ordering the payment of $117,995.

    Post-Employment Restraint Clauses

    By way of update, a recent decision by the Federal Court of Australia upheld a two (2) year post-employment restraint clause against a former employee (which provided pay to an employee for all but the first three (3) months of the period). This is an unusually long period for a post-employment restraint to operate, but the Federal Court determined it was reasonable given the circumstances, the detailed nature of the employment contract and the provision of pay to the employee for a majority of the period.

    To ensure your business has a confidential information and post-employment restraint clause that is valid, please contact Nick Stevens at Stevens & Associates Lawyers.

    Author: Nick Stevens, Principal, Stevens & Associates Lawyers

    Stevens & Associates Lawyers has provided advice to clients on protecting a business’ confidential information and post-employment issues. Nick Stevens is on the Panel of Expert Bloggers and is the employment law expert on www.aiia.biz

    Disclaimer: This article provides general information only.  It is not legal advice, and is not a substitute for legal advice.  Specific advice should be sought to take into account your particular circumstances.  Stevens & Associates Lawyers is a boutique industrial relations and employment law firm. It has liability limited by a scheme approved under Professional Standards Legislation.


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      Maat Solutions Pty Ltd
      Level 6, 60 Pitt Street
      Sydney NSW Australia

      T: +61 (02) 9247 9459
      F: +61 (02) 9247 9550













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