Home' HR Monthly : June 2018 Contents Most of the legal obligations in the
employment relationship begin when a
staff member comes on board and end
with their resignation or termination. But the
time before and following employment is hardly
a legal black hole. There is a range of obligations
HR needs to be aware of that regulate conduct
before a prospective employee begins, and
control how both parties act following the
conclusion of the relationship.
Restraint of trade
Perhaps the most common form of post-
employment obligation, restraints of trade are
contractual clauses that limit the ability of
employees to move from one job to another and
take their clients, knowledge or colleagues with
them. The law on this topic is complicated and
changing, but essentially courts will not uphold
a restraint of trade clause unless it:
1. Protects a legitimate interest of the employer.
2. Goes no further than is reasonably necessary
to do so, considering both the interest of the
parties and the public interest.
A clause that prevents an employee from
working in the same sector for three months
within a 10-kilometre radius might be
reasonable; a clause prohibiting the employee
from undertaking any work for 12 months
anywhere in the world would almost never be.
In Just Group v Peck, the chief financial
officer of Just Group left to work for a
competitor, the Cotton On Group. Just Group
failed to enforce a clause preventing Peck from
engaging in any activity "the same as, or similar
to" any part of the Just Group's business.
The clause was 'cascading', in that it provided
various restraints in the event that some were
invalidated by a court -- it applied variously
to Australia and New Zealand, Australia or
Victoria, and for 24, 18 or 12 months.
While such clauses are common, it was
frowned upon in Just Group's case, given "it is
not for the court to make a new agreement for
the parties". Because of the uncertainty in this
area, restraint of trade clauses should be drafted
with careful consideration.
Employees have contractual, equitable and
sometimes statutory duties not to misuse
confidential information. These duties
usually narrow after termination. However,
the employee is not completely off the hook.
While they are free to use the skill, experience,
know-how and general knowledge they gained
during their tenure, the law prohibits the
post-employment use of trade secrets.
Legal obligations, on both sides, aren't over
once an employee leaves their job.
BY JOHN WILSON AND KIERAN PENDER
BRADLEY ALLEN LOVE
In Ansell Rubber v Allied Rubber Industries,
two workers at a glove-making factory misused
their employer's confidential information to set
up a competing business. They were found in
breach, ordered to cease using a machine they
created based on the confidential information
and to pay damages. Relevant factors
considered in the case included the secrecy of
the information, its value, the efforts spent by
the employer in developing the information and
the ease with which the information could
An employer is under no obligation to provide
a reference, unless this duty is created by an
express or implied term of the contract.
In industries where the absence of a reference
will make it extremely difficult to gain new
employment, courts may be more willing to
imply a term than they would otherwise.
Once an employer decides to give a reference,
it should provide an honest and accurate one.
If it doesn't, the employer could be held liable
in defamation to the former employee if they
can't find another job due to an unfairly negative
reference. Or it could be held negligent to
another employer who hires the person on the
basis of a misleading reference and regrets
the decision. •••
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If an employer
doesn't provide an
honest and accurate
reference, it could
be held liable in
defamation to the
employee if they can't
nd another job.
June 2018 HRM magazine 37
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