Employees

Key considerations for employment contracts

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Here at Coutts we understand how important it is as a business owner to maintain positive and healthy relationships with employees. We also understand how crucial it is for an employer to protect their interests and limit their exposure to various claims by their employees.

With the combination of the Fair Work Act 2009 (Cth), the National Employment Standards and Modern Awards, entering into well written employment contracts is essential.

In fact, even if you don’t enter into a written agreement with your employees you are still entering into an oral agreement and therefore owe certain duties and obligations to your employees.

Under the National Employment Standards, whether there is a written employment agreement in place or not, a set of minimum entitlements automatically applies to employees. For example, maximum weekly hours, annual leave, public holidays and notice of termination, and these entitlements are on top of the employee entitlements already provided for under the relevant Modern Awards.

Although you do not legally need to provide an employee with a written agreement, employers often struggle if a dispute arises with an employee in the future, as there is no record of the agreed terms of the employment relationship.

So, the question arises, why not enter into a formal written agreement that clearly outlines everybody’s expectations and obligations?

Some key items to consider when it comes to employment contracts are:

1.       Does the agreement comply with current legislation?

Employment agreements will need to comply with the Fair Work Act 2009 (Cth). It is likely that any employment agreement entered into prior to 1 January 2010 will need to be reviewed to provide for the provisions in this act.

2.       Have you reviewed the relevant award?

Employment agreements must comply with the applicable modern award. Awards will often dictate:

·       minimum wages;

·       overtime and penalty rates;

·       types of employment such as casual or permanent;

·       employee classifications;

·       expenses such as travel and meal allowances;

·       breaks, hours of work and rostering;

·       leave entitlements.

It is not uncommon for employment agreements to contain a provision that is inconsistent with the award without the employer even realising, for example paying an employee less than what is required under the award for their position.

In most situations it is likely that the award would prevail and the provision in the employment contract is overridden by the award. To avoid disputes with employees or a breach of the law, it is crucial to ensure the employment terms comply with the law and in particular the relevant award.

3.       Is a restraint of trade necessary to protect your business?

Restraints of trade are very common to try and prevent an employee from working with a competitor, poaching clients or other employees.

However, restraints of trade are only enforceable where the employer can show the restraint is necessary to protect legitimate business interests such as trade secrets, confidential information and clients. The restraint can’t be against public interest, as the employee has a right to earn a living. For example, a restraint which tries to restrict employees from working for a competitor for 100 years within Australia, is unlikely to be enforceable.

Factors to be considered when determining the enforceability of the restraint include the nature of industry, the time of the restraint, the distance of the restraint and overall how reasonable the restraint is.

It is really important to have a properly constructed restraint that is clear, well-worded and reasonable to give the restraint the best chance of being enforceable.

4.       Does the employee know what is expected of them?

A written employment can clearly define the duties and role of the employee to create certainty and ensure the employee is aware of an employer’s expectations.  

5.       Does the agreement protect your confidential information?

Often a business has confidential information which may include things such as financial statements, manufacturing processes, trade secrets or client databases. It is important to ensure your employment agreement protects this information and that an employee is prohibited from disclosing confidential information as it may harm the business.

6.       Have you covered your intellectual property?

Employees are likely to be using your intellectual property throughout the course of their employment, so it’s important to ensure it remains your intellectual property.

Depending on the type of employment, the employee may also be developing or creating new inventions, processes or procedures whilst employed with you. If this is the case, you may want to consider ownership of these creations and covering it in the employment agreement to protect your interests.  

7.       Does it deal with the policies of the business?

You should consider if you have any policies you want to incorporate into the employment contract. For example, a drug and alcohol policy or a work health and safety policy. However, if you are including policies in an employment contract, you may also bind yourself to follow and implement those policies under contract law. Alternatively, you might want policies to be acknowledged by the employee as lawful directions. Generally, if you make the policies accessible and clearly communicated to employees you should be able to rely on those policies.

 

Coutts have expertise in preparing tailored employment agreements that both protect the interests of employers, as well as ensure employees are aware of their obligations. Call 1300 268 887 and book an appointment with Alexandra Johnstone or Keely Irving today.

For further information please don’t hesitate to contact:

Keely Irving
Lawyer
keely@couttslegal.com.au
02 4607 2124

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

Copyright 101

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‘Copyright’ is a phrase most people have heard or used, but do we actually know that much about it?

 

What is Copyright?

Copyright is an exclusive legal right given to a creator for a certain amount of time over material they have produced. Copyright is usually given to people who produce creative work like authors, artists or musicians.

Copyright will protect work such as:

  • Music;

  • literature;

  • artistic work like paintings;

  • sound recordings and broadcasts;

  • films;

  • computer programs.

 

Copyright will not cover:

  • ideas, techniques and information;

  • names, titles or slogans;

  • images of people.

 

Copyright generally means that other people need permission to use the work which is protected. It is possible to provide licenses for other people to use copyrighted material.

 

When does someone get copyright?

Lucky for the creator of the work, copyright automatically applies once the work is written down or recorded in some way.

There is no way to register copy right in Australia, it is not necessary to apply to receive the protection of copyright.

 

How do I let people know I have copyright?

As there is no way to register copy right there is no database to check in the same way as other intellectual property such as trademarks.

Some people will choose to use the copyright symbol © and a copyright notice which consists of the owner’s name and year of publication.

A copyright notice and the symbol are optional and not mandatory in Australia. 

 

How long does copyright last?

Generally, copyright will last for the life of the creator plus 70 years. In some situations, the length is based on the year of publication, so copyright will last 70 years after it was first published.

 

Infringement and Disputes

If there is a dispute about who owns copyright it will usually be heard by a court to make a determination.

Copyright means people need permission to use the work. If somebody commits a copyright infringement it may be necessary to issue a letter to demand to request the infringing act stops or to commence legal proceedings.  

 

How does Copyright work internationally?

There are a number of international treaties which mean that material created in Australia is recognised and protected in most countries overseas.

Due to the international treaties and the Copyright Act 1968 (Cth), Australia protects majority of copyright material produced overseas.

 

Coutts has experience in dealing with Intellectual Property and invites you to contact us if you have any enquiries.

 

For further information please don’t hesitate to contact:

Rebecca Watts
Lawyer
rebecca@couttslegal.com.au
02 4607 2148

 

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

I'm only loaning money to family or friends. Surely I don't need a loan agreement?

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There are many different situations where people might loan family or family friends money for lots of different reasons.

 

Even though loaning money may be a very supportive thing to do, it’s important to consider how you can minimise risk to yourself, what could go wrong and what could help prevent issues arising.

 

A Loan Agreement is definitely helpful for your worst-case scenario if the relationship with the person you have loaned money to goes sour or if things go off course.  Like all other contracts, the Loan Agreement is designed to set out risk allocation and responsibilities and be helpful when things go wrong.

 

So, what might go wrong?

Some people may be gifting the money but if you are expecting to be repaid either in full or in part you should put the agreement in writing. There are countless ways for issues to arise if it is unclear without a Loan Agreement in place, including that the loan was a loan to begin with and on what terms the money was to be repaid, whether interest is repayable and so on.  

 

Below are some examples where loans to family and friends can result in a legal predicament:

1.     Disagreement that there is even a loan

If you don’t have an agreement clearly outlining the terms of the loan you may find yourself having to argue that the loan even existed in the first place. This hypothetical situation became a reality for an elderly couple in the case of Berghan & Anor v Berghan [2017] QCA 236 when their son denied there was a loan between the parties and instead said that the money was a gift to him.

 

Whilst the couple ended up being successful with the Court of Appeal declaring that there was a loan and it was not a gift, the couple had to endure several court hearings (and plenty of costs) to achieve this outcome.

 

This demonstrates the issues caused by informal loan transactions between family members and proves that it is better to be safe than sorry. 

 

2.     Demands to be repaid in full

Whilst many people may focus on how much money is being loaned, it’s important to consider exactly when the money should be repaid. It is possible that the parties will end up with different expectations of when the money should be repaid if the payment terms are not clearly outlined in a Loan Agreement. Without the existence of a loan agreement the lender may be expecting and relying on a repayment and the unclear deadline is missed.

 

On the other hand, if there’s no agreed repayment dates in writing, the lender may make a demand that the entire amount is repaid immediately, and the borrower may not be able to do this. 

It is very easy for a disagreement to occur and result in a party needing to threaten legal action. A written Loan Agreement can prevent this situation and the unnecessary stress that may come along with it.

 

3.     Family Law Property Settlements

It is not uncommon for loans from family members or friends to become an issue of dispute in Family Law proceedings. For example in the matter of Liakos & Zervos & Anoy [2011] FamCA 547 the husband argued that he owed his father a principal amount of $587,000.00 plus interest which was loaned to him in separated transactions over a number of years. However, the wife disputed these loans. 

 

The Court found that the loans were not previously enforced by the father (the lender) and were not expected to be. The steps taken by the father to enforce the debts appeared to coincide with the wife’s application to the Court to divide the assets between the wife and husband.

 

Normally, in Family Law a court will distribute the net value of assets between the parties after the debts have been deducted. In this situation the loans from the father were not included as a debt to be deducted. Therefore, there was a significantly larger amount of money to be divided between the husband and wife without repayment to the husband’s father. Basically, the wife received a share of the money the husband believed was owed to his father.

 

Loans can have implications on Family Law proceedings, so it is important to have the right documents in operation to avoid this as much as possible.

 

4.     A Loan in exchange for living in a property

Sometimes people will come up with an arrangement where the lender will give a loan and the borrower will then let the lender live in their property. For example, a mother may sell her property and give some of the proceeds to her daughter with the intention that the daughter will buy a large property in her sole name with a granny flat for the mother to live in.

 

In this situation, technically the new property is solely in the daughter’s name. If a disagreement arises the daughter may try and evict the mother and deny the arrangement ever existed.

Coutts is here to help and can provide advice on the best way forward to protect an interest in property.

 

How can I protect my legal interests?

At Coutts we can assist you in negotiating and preparing a Loan Agreement or other suitable document that mitigates the legal risks and issues as much as possible. For example:

 

  1. We can prepare a written Loan Agreement which is signed by all relevant parties and outlines the terms of the loan.

  2. We can advise on the differences between secured and unsecured loan agreements.

  3. We can take you through options for security such as potentially lodging a caveat or mortgage over the property under the Loan Agreement.

  4. We can advise you on the enforcement options if the there is a dispute or default under the Loan Agreement.

 

It is important to obtain legal advice prior to entering into a Loan Agreement or entering into any form of loan arrangement. Clearly defined terms in the format of a proper Loan Agreement can help reduce the room for disagreements.

 

It is also important to know whether any time limitation periods for enforcing the loan apply.

 

At Coutts we can help with all elements of your Loan Agreement so please contact our commercial law team if you have any questions or enquiries.

 

For further information please don’t hesitate to contact:

Rebecca Watts
Lawyer
rebecca@couttslegal.com.au
02 4607 2148

 

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

Critical Issues for Selling or Purchasing a Business

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Deciding to sell or purchase a business can be one of the biggest decisions you will face as a business owner. Even once you decide to sell or purchase a business there are several things that must be considered to try and ensure the sale runs as smoothly as possible. We have listed a sample of the critical issues that usually arise and considerations and risks for both vendors and purchasers.

1.       Critical: Ensuring you use right structure to sell or purchase the business: asset sale or share sale

There are two common ways to buy or sell a business. It is important to make an informed decision as to the structure that is the most appropriate for you.

The first option is an asset sale. This is where the vendor (business seller) uses a Sale of Business Contract to sell the assets of the business to the purchaser. For example, the purchaser buys the business name, the equipment, the stock and the clients under that contract.

The second option is a share sale. This structure is typically used where the business is run by a company. Here, the vendor (business seller) is usually the director/shareholder of the company and will sell the business by selling their shares in the company through a Share Sale Agreement. This means that the purchaser will buy the shares in the company and become the director and shareholder in place of the vendor. By doing this the purchaser controls the company and as such controls the business and its assets and liabilities.

Coutts assists vendors and purchasers in identifying risks with each available structure and determining which structure is the most appropriate for the transaction.

2.       Critical: Ensuring new business activities by the vendor are properly dealt with

If you are a vendor and you are thinking about opening a new business, you will need to consider whether you want to engage in certain activities which will compete with the business you are selling.

For example, you might be a real estate agent, and you might want to open another real estate agency in the future. Often a purchaser of a business will include a restraint period for a certain period of time and kilometres. So, you need to consider how this might affect or restrict you opening a new business.

On the other hand, if you are purchaser it is important to think about setting restraint periods and distances as you’d probably be unhappy if the vendor opened the exact same type of business down the road a few weeks after you bought, and business and customers started going there instead.  That is, if the vendor became your direct competitor.

3.       Critical: Ensuring confidentiality

Selling a business will often involve providing information that is confidential and private. Coutts can help you consider whether a confidentiality agreement is necessary for the parties as we understand the importance of ensuring the confidential details of a business remain confidential.

4.       Critical: Understanding possible tax consequences

Once the purchase price is agreed on, both the vendor and purchaser need to think about how they are going to divide the purchase price between the good will and equipment of the business. This is known as apportionment of the purchase price and could have potential tax consequences.

Another factor to consider is whether the business will be sold on a walk in/walk out basis. For example, will the business continue to trade up until the settlement date? Will the vendor provide the purchaser with everything they need to continue to operate the business? This is known as the supply of a going concern and will affect whether GST is payable on the sale or not.  

5.       Critical: Ensuring the business premises are properly dealt with

If there is a lease over the property where the business trades, a vendor will need to get permission from the landlord to assign the lease to the purchaser or to permission from the landlord to grant a new lease to the purchaser.  It is important for a vendor to arrange this otherwise after the sale of business, the vendor risks remaining committed under a lease for a business that it no longer owns.

For a purchaser, it is often crucial to obtain the consent of the vendor’s landlord because and obtain permission to use the premises when they become the business owner. That is, a purchaser can’t run the business at that location without the lease or other appropriate permissions.

Coutts regularly negotiate with landlords’ solicitors to arrange assigning or granting leases or any other necessary permissions to obtain or deal with the right to use the premises for the new purchaser or the removal of risk in premises for the vendor.

6.       Critical: Ensuring employee entitlements are properly dealt with

If you’re a vendor and you have employees, you will need to think about their entitlements such as annual leave, sick leave and long service leave, and whether the employees are being transferred to the new purchaser. If the employees are transferred there is usually an adjustment for the purchaser to cover employee accrued entitlements.

If you’re a purchaser, you need to think about whether you will keep any of the current employees. You need to inform the vendor of your decision, so they can either give notice to employees to terminate their employment or make an adjustment in your favour for any entitlements owed to the employees that you are retaining.

7.       Critical: Ensuring stock is properly dealt with

A vendor should consider whether they have stock that needs to be sold with the business. For example, if you own a hairdressing salon you might sell shampoos and hair straighteners from suppliers. If so, a vendor should consider whether the value of the stock is included in the purchase price or if the purchaser will be paying extra for the stock, together with how the stock is valued.

If the purchaser is paying extra for the stock, you should also consider how the stock will be valued. Perhaps the vendor and purchaser will complete a stock-take together, or a sum will be agreed, or maybe an independent valuer will be appointed to complete the stock-take.

For a purchaser, it is important to know whether the purchase price includes stock or if you need to pay extra for stock, so you can ensure that you have the funds available. If you are paying extra for the stock, you should consider negotiating a trading stock maximum with the vendor. This means you can set a maximum amount for stock, for example $20,000.00. Then, for example, if the stock is valued at more than $20,000.00 you can choose which stock to purchase up to that amount.

 

Recommendations

A properly prepared Sale of Business Contract is integral in addressing risks and issues, protecting your interests and ensuring that what can be a complicated process is as stress free as possible. Even if you and the purchaser have agreed on what seems like the major elements of a sale of business, such as the purchase price and the date for settlement, Coutts are here to assist in ensuring the smaller (but often equally as risky) details that are the foundation to a smooth sale of business are considered and dealt with and ensuring risks are addressed long term and properly.

If you are after the best advice on how to sell or purchase a business, call Coutts Solicitors & Conveyancers on 1300 268 887 and book an appointment

For further information please don’t hesitate to contact:

Rebecca Watts
Lawyer
rebecca@couttslegal.com.au
02 4607 2148

 

Keely Irving
Lawyer
keely@couttslegal.com.au
02 4607 2124

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

Terms and Conditions: a snapshot on fundamental considerations for your business

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Terms and conditions are a risk management tool and an allocation of roles and responsibilities

Terms and conditions are important to protect businesses and to make it clear what a customer is signing up to. The existence of terms and conditions in our daily lives is inescapable, they outline the way goods and services are provided and accepted. For example terms and conditions will describe what is being provided to the consumer, payment details, time frames, return/refund policies, warranties and disclaimers. You may not notice, but terms and conditions are everywhere, on the bottom of online shopping sites, on signs before we enter into car parks, a waiver before go-karting, attached to quotes, or a in the form of a box to be ticked saying ‘I have read and accept the terms’ before we can buy a concert ticket online. Irrespective of the size of your business it is extremely important to have well thought out terms and conditions when conducting transactions and that fit seamlessly with the way you conduct business.  It is also critical that terms and conditions cover off risks to you and your business and are not considered unfair contracts under the new unfair contracts regime.

 

The importance of timing your terms and conditions right

It is crucial to provide your terms and conditions to a customer before you start providing any goods or services to that customer. This has been a fundamental feature of contract law for decades, the case of MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 8 ALR 131 stated that a purchaser must be afforded a ‘reasonable opportunity’ to either accept or reject the terms and conditions of purchase. It is not generally sufficient to provide a client or purchaser with a copy of your terms and conditions after the agreement has been entered into or after you have started providing goods and services to that customer. With this in mind, your business should set out the expectations of the transaction from the beginning in order to be afforded maximum protections.  

Your terms and conditions are essentially an allocation of risk between you and your customer and a risk protection tool.

 

Tip: ensure that your customers read and understand your terms and conditions

A business should make their terms and conditions easily accessible and obvious. It is wise to include the terms and conditions at the start of the document, with the signing section to follow – this helps ensure the customer has the opportunity to read and consider the terms and conditions before signing.

Ideally, the way you structure your terms and conditions should make it difficult for a customer to argue that they were unaware of the terms because they didn’t read them. This happened in the case of Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 where a party attempted to argue they could not be bound to the terms and conditions of the contract as they did not read them. The provisions were on the reverse page of the agreement and despite being on the reverse, the party was held to have accepted them upon signing the document.

However, be careful that the terms and conditions are not underemphasised on purpose. The case of Director of Consumer Affairs Victoria v Domain Register Pty Ltd [2007] FCA 1603 held that the small and difficult font outlining where the terms and conditions were to be viewed was a direct attempt to give important information no prominence for commercial gain.

 

How might I incorporate terms and conditions to online purchases or online services?

Generally, there are two ways in which you can include your terms and conditions online.

1. “Click Wrap Agreement”

This technique of acceptance requires a consumer to click on a button to the effect of “I agree” or tick a box saying something similar. The terms and conditions will usually be accessible through another link. In eBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA 1768 it was agreed that “click wrap” was an effective way to convey terms and conditions. However, this method of agreement has been a controversial one in Australia and overseas as the judgments have considered all the relevant facts in making a determination as to whether the agreement to the terms and conditions was validated by the click.

2. “Browse Wrap Agreement”

On a website there may be a link to the terms and conditions displayed somewhere on the website, often the bottom of the page, and require clicking a hyperlink to view them. In these situations, there is no requirement to click on an “I agree” type button but contrastingly, the consumer may not even be aware of the terms and conditions. The courts have typically been less likely to enforce agreements made through the “browse wrap” display technique as the notice to consumers has not been made obvious. 

 

What are the essential inclusions for my terms and conditions?

Your specific individual terms and conditions will vary depending on the services offered and the nature of the transactions. It is important to tailor your terms and conditions to the way you supply the service or product and not to copy and paste from a competitor, particularly given you do not have ownership or any rights to use or change the terms and conditions of a competitor. 

Some essential inclusions for your business might include:

  • The goods or services: What is the customer receiving? What is its purpose, function or use?

  • Payment terms: It should be clear when you will be paid. Is it before or after the product or service is provided? How many days do they have to pay? Is there a deposit required?

  • Additional costs, fees or disbursements: In what circumstances will the customer incur an additional fee, cost or disbursements?

  • Time frames: When will the product/service be provided to the customer? What happens if the deadline is missed?

  • Intellectual property: If applicable, it is crucial to state who owns what intellectual property to avoid transferring any rights to it.

  • Warranties: What are you warranting? How long is the product or service good for its purpose? What if the product or service is defective or faulty?

  • Returns and refunds: What is the process for returning a product or obtaining a refund? Your process will need to comply with Australian Consumer Law.

  • Termination: How can the agreement be ended? Is there a time frame or expiry date? Who can end the agreement and when? What are the consequences of termination?

  • Dispute resolution: What is the process for dealing with a dispute if it arises?

  • Indemnities and liability: If something goes wrong, who is liable for what? Which party is on the hook for certain acts, claims, consequences, damages and costs?

  • Confidentiality: What elements of the agreement are confidential and cannot be disclosed to other people?

It is also important to know what you cannot include. The Australian Consumer Law provides a set of consumer guarantees, which cannot be altered or excluded by any terms or conditions. Some of the guarantees include:

  • Guarantee as to acceptable quality;

  • Guarantee as to fitness for a particular purpose;

  • Guarantee as to due care and skill;

  • Guarantee as to reasonable time for supply;

Any terms and conditions which attempt to alter any of the guarantees found in the Australian Consumer Law will not be valid.

The unfair contracts regime which was extended on and from November 2016 has also impacted on the types of terms that cannot be included. For example, many terms and conditions would state that the party supplying the goods or services could unilaterally change the terms of the agreement without giving the other party notice or the opportunity to terminate the agreement. This is now unacceptable and could result in the terms and conditions being determined an unfair contract.

The use and inclusion of terms and conditions in your transactions and agreements are essential to safeguard your business and make it clear what the consumer can expect. At Coutts we are able to prepare tailored terms and conditions, which will take into account the individuality of your particular business. We can ensure you are complying with the law but ensuring the terms and conditions have the look and feel of your business and are plain language and friendly. Please do not hesitate to contact our experienced team to enquire about amending or obtaining terms and conditions for your business.

 

For further information contact:

Rebecca Watts
Lawyer
rebecca@couttslegal.com.au
02 4607 2148

 

 

 

Gardening Leave - what it is and why it's relevant.

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What is gardening leave?

Gardening leave is a concept where the employer does not require the employee to come to work and perform their usual duties, but the employee still receives their usual remuneration despite not actively working.

 

Gardening leave usually arises in the following situations:

  1. Where the employee has resigned, and the employer does not want the employee engaging with clients during the relevant notice period; 

  2. Where the employee has been suspended while awaiting disciplinary action;

  3. Where the employer is considering terminating the employee; or

  4. Where the employer has provided the employee with time to find alternative employment.

 

Does an employer have a duty to provide work?

Gardening leave has raised many questions around whether the employer has a duty to provide an employee with work or whether the employer can enforce a right to gardening leave.

 

There is no automatic implied term in an employment relationship that an employer must provide an employee work. The duty to provide work must be expressly stated in the contract. The primary obligation of the employer is to pay the employee’s wage.

 

However, if the job requires a particular special skill or talent for example if the employee is a singer, then there may be an obligation on the employer to provide the work.

 

From a practical perspective, the right of an employer to place an employee on gardening leave must typically be first set out in that employee’s contract.

 

Does an employer have a right to place an employee on gardening leave?

The issue of whether the employer has the right to place an employee on gardening leave in the first place has been an area of debate. In the case of Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414 the employee resigned, and the employer placed the employee on gardening leave and ordered the employee not to attend work during the notice period. The employee was under a fixed term contract and had resigned before the end of the fixed term. As such the employer refused to accept this and sought an order to prevent the employee from working with a competitor whilst the contract was still on foot. The court upheld that the employer had an express right to direct the employee not to attend work whilst the contract was ongoing.

 

Similar, in the matter of Actrol Parts Pty Ltd v Coppi (No 2) [2015] VSC 694 the parties were arguing about whether the employer had the right to place the employee on gardening leave under the employment contract. Following the employee’s resignation, the employer placed the employee on gardening leave and during the gardening leave the employee joined a competitor. This normally would have been a breach of the employment contract however, the employee tried argued that the employer did not have an express right under the employment contract to place him on gardening leave in the first place and therefore, the contract was repudiated by the employer and the employee was free to work with the competitor.  

 

The employee in this case was a sales representative with access to clients and confidential information. Therefore, the court said that it was an implied term that the employer could place the employee on gardening leave.

 

In conclusion, the court deemed the employer could place the court on gardening leave. However, the employer made the mistake of removing the employee’s motor vehicle and mobile phone during the gardening leave which were part of the employee’s salary package. This meant the employee was not receiving his usual remuneration and the employer was found to have repudiated the employment contract and the employee was able to work for a competitor.

 

Key practical tips 

  • Check employment contracts for clear provisions which enable employers to place employees on gardening leave;

  • Consider whether an employee is receiving the usual remuneration and employment benefits the employee ordinarily receives during any gardening leave and ensure you understand the legal implications of this;

  • Seek legal advice if there is no express right for an employee to be placed on gardening leave but you would like to take this course of action;

  • Seek legal advice about actions taken during the gardening leave by an employee, including searching or obtaining new employment with a competitor. 

 

At Coutts we have experience in drafting employment agreements, reviewing and providing advice on employment agreements and employment disputes. Coutts understands the importance of providing clear and accurate advice to try and prevent disputes in the first place and to resolve them when they do occur as soon as possible. Please contact our Commercial Law department today if you have any questions.

 

For further information contact:

Rebecca Watts
Lawyer
rebecca@couttslegal.com.au
02 4607 2148