Rules Of Employment

Under Common Law

At common law, both the employer and the employee are owed duties to the other that are implied into the employment relationship thereby existing whether expressly stated or not. For example, an employee has a duty to their employer to be faithful and avoid conflicts of interest and to maintain confidentiality, and an employer has a duty to their employee to remunerate them for their service.

However, a written employment contract can be used to set out and expand on these implied obligations, particularly with regard to an employee’s duties to protect the employer’s rights and interests and to give certainty as to the notice to be provided on termination.

Clauses focusing on protecting the employer’s proprietary interests that are typically included in employment contracts include:

1. Clauses prohibiting the unauthorised use and disclosure of confidential information.

2. Clauses confirming the employer’s ownership of intellectual property rights.

3. Restraint of trade clauses preventing the employee from soliciting the former employer’s clients and employees and competing with the former employer after employment.

How to ensure that such clauses are enforceable requires careful consideration. This is because they are likely to be closely scrutinised by a court if a dispute arises. With this in mind, these types of clauses should go no further than what is ‘reasonable’. This is particularly so for restraint of trade clauses.

A court will only enforce post-employment restraint clauses if they are deemed to be reasonable in all the circumstances. Employers’ interests are usually best protected by drafting the clause in a cascading style by reference to geography, time, and scope. This enables the clause to be read down to the level of restraint that a court considers necessary to protect the employer’s legitimate interests.

To minimise the potential for disputes and litigation following the termination of the employment contract, it is essential that the contract contains a clause specifying how the employment contract is to be terminated.

In the absence of a termination of employment provision, the common law and applicable legislation will apply. Common law requires ‘reasonable notice’ of termination to be provided by either party. When determining what constitutes reasonable notice, courts consider a number of factors including how long it will take the employee to find similar employment and the employee’s age and length of service.

Generally speaking, reasonable notice can range from one to 12 months or more depending on the circumstances. However, the requirement to provide reasonable notice can be avoided by including notice period requirements in the employment contract. As discussed above, the notice period must at least satisfy minimum notice requirements under the WR Act.

Contract Disputes

There are a number of avenues available to the parties in dispute over terms of an employment contract. What those avenues are depends on whether the terms and conditions in dispute are enforceable under statute or at common law.

Under statute, in the event that an employer does not comply with its obligations to provide an employee with minimum statutory entitlements at the federal level, the employee is able to claim these entitlements through the federal court system either in their own capacity, through an organisation representing them such as a union, or through the Workplace Ombudsman which is a statutory body set up to protect employee entitlements.

A successful claim in such circumstances can result in compensation for loss suffered as well as penalties of up to $33,000 imposed on the employer. Similar systems are set up at the state level in the event that an employer does not provide minimum statutory entitlements required under state legislation.

Under common law, any breach of a term agreed to in an employment contract is actionable at common law providing that any term relating to post-employment obligations must be reasonable.

In some circumstances the courts have shown a willingness to order injunctions to prevent a party from continuing to breach the employment contract–for example, to stop a former employee using their former employer’s confidential information or soliciting their clients.

Where a party can demonstrate loss suffered as a result of a breach of the employment contract, the courts will generally compensate the aggrieved party by way of damages.

* Mark Dunphy is partner at Hall & Wilcox ( This email address is being protected from spam bots, you need Javascript enabled to view it ), and Alison Baker is a senior associate ( This email address is being protected from spam bots, you need Javascript enabled to view it ).