STRATEG EYES: Workplace Perspectives

ISSUE 24 September 2017 STRATEG EYES: Workplace Perspectives Welcome from Think Before My house, my Just the facts: the Founder You Act: rules: the “pros Mistakes to & Managing Enforcing and cons” of avoid when Principal Restraints workplace conducting an Strategically policies investigation + more A LOOK INSIDE: Message from Founder & Managing Principal 3 Think Before You Act: Enforcing Restraints Strategically 4 My house, my rules: the “pros and cons” of workplace policies 7 Just the facts: Mistakes to avoid when conducting an investigation 10 How long is too long? When the job can no longer be done by an injured worker 14 Fair Work Act amendments enhance penalty provisions & impose new franchising obligations 17 Events 18 2 www.peopleculture.com.au Message from Founder and Managing Principal The last few months have seen PCS extremely busy on a range of fronts. In addition to launching the second edition of our Guide to Services, continuing to run our extensive thought leadership program and, most importantly, servicing our clients across their needs in the legal and strategic space of people management we have consolidated our philanthropic journey. We announced earlier in the year that the firm had entered into a sponsorship arrangement with Packemin Productions and we were delighted with our inaugural show, Miss Saigon which was held at Riverside Theatres in Parramatta. My heartiest congratulations to Neil Gooding and his team for putting on such a tremendous production and we look forward to the February 2018 production of Shrek The Musical. On the rugby front, our Manly Marlins showed a remarkable turnaround to secure the minor premiership in the Shute Shield having missed out on the semi-finals last year. While ultimately unable to secure a spot in the Grand Final we commend Brian “Billy” Melrose for his coaching efforts and congratulate Anthony Bergelin on a highly successful first year as Club President. As we go to print the National Rugby Championship is in full swing and the PCS Greater Sydney Rams have already demonstrated that they will be a competitive outfit. This is the fourth year of our firm being the principal sponsor of the Rams and we wish the team well in 2017. And in the education sector the Firm continues to sponsor Srey Oun as she progresses through high school in Cambodia. This, coupled with our support of the Year 9 Latin Reading Competition and the prizes we will be sponsoring in the University of Sydney’s Classics Department reflect the passion of the Firm in investing in education. Joydeep Hor FOUNDER AND MANAGING PRINCIPAL www.peopleculture.com.au 3 Think Before You Act: Enforcing Restraints Strategically Michael Starkey, Associate It is a common misapprehension, particularly among employees, that post-employment restraints are rarely enforceable. In fact, provided they go no further than is reasonable and necessary to protect an employer’s “legitimate business interests”, courts are willing to uphold such restraints, which can prevent former employees from taking up work with a competitor, or soliciting or accepting work from the employer’s clients. However, post-employment restraints remain tricky for reasons broadly associated with two “stages”. 1. Documentation and drafting: post- Up-to-date Documentation employment restraints must be properly documented and drafted so that they only The surest way of protecting an employer’s impose obligations which are reasonable and legitimate business interests is including a necessary; and properly drafted post-employment restraint in an up-to-date contract of employment that 2. Circumstances of enforcement: when an is applicable to an employee’s current position. employee’s employment comes to an end, While all employees have ongoing obligations a business needs to make a decision about in respect of an employer’s confidential whether or not it is worthwhile to seek to information, attempting to enforce restraint enforce the restraint. obligations which are not documented, or which This article looks at a number of considerations are only documented in an employment contract employers may wish to take into account when that is no longer relevant to the employee’s role, making decisions associated with these “stages”, in is a difficult task. order to ensure that their use of post-employment restraints is practical, strategic and helps to protect their business interests. 4 www.peopleculture.com.au Employers who are concerned about an This is particularly important for employers employee’s post-employment activities that outside of New South Wales. While courts in may not be captured by a documented post- New South Wales are permitted by legislation to employment restraint should, nonetheless, “read down” a restraint which would otherwise seek legal advice in respect of their position. be too broad so as to make it enforceable, courts In some cases, it may be possible for an employer outside New South Wales do not have this ability. to obtain injunctive relief to prevent a former employee from wrongfully diverting or Upholding Your End of the exploiting a business opportunity that arose as a Bargain consequence of the employee’s employment.1 An employer that wishes to enforce a post- Finally, employers should also ensure that employment restraint should be careful to any post-employment restraints contained in “uphold its end of the bargain” during an an employee’s contract are incorporated (or employee’s employment. In one recent case,3 a otherwise, not displaced) by any documentation leading accountancy firm was unable to prevent entered into regarding an employee’s separation a senior accountant setting up in competition from the business (such as a deed of release). because it was found to have “repudiated” his employment contract. This “repudiation” Be Specific came about because of certain changes the One of the best ways of ensuring that a post- employer made to the employee’s role and employment restraint is drafted so as to be bonus structure. These changes were said by the enforceable is to be as specific as possible court to be so fundamental that they indicated with respect to the activities the employee is that the employer no longer intended to be restrained from undertaking. This is particularly bound by the employment contract. In these so in the case of broad non-compete clauses circumstances, the employer was unable to rely which seek to prevent an employee from on the post-employment restraints contained working with a competitor of the employer. in it. As well as being reasonable in terms of In any event, parties should always aim to ensure geographical scope and duration, these clauses that they adhere to the terms of a contract. should take into account the nature of the However, employers may take some reassurance employer’s business and the employee’s position from the fact that they may be able to enforce within it. post-employment restraints, even if they In an illustrative case from 2016, an employer have breached an employee’s contract, if their was unable to enforce a non-compete clause breach is not so fundamental as to constitute against its CFO because the way in which the a repudiation of the contract. For example, clause was drafted would have prevented her in a 2015 case,4 another leading accountancy from working for a competitor in any capacity firm was able to enforce a post-employment (examples raised during proceedings included restraint against a key executive whose business “check out operator” or “shelf stacker”). The it had purchased despite not paying certain court refused to enforce the clause because, instalments of the purchase price for the if it did so, the CFO would be prevented from business on time. This was (in part) because the working in positions in which she could pose no late payment, while a breach of the contract, “threat” to her former employer’s legitimate was not found to amount to a repudiation. business interests if the clause was enforced.2 1 Climate Change Technologies P/L v Glynn & Ors [2017] SASC 60. 2 Just Group Ltd v Peck [2016] VSC 614. 3 Crowe Horwath (Aust) Pty Ltd v Loone [2017] VSCA 181. 4 Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147. www.peopleculture.com.au 5 Considering the Reason for Termination Key takeaways When considering whether, or to what extent, 1. While post-employment restraints to enforce a post-employment restraint, should be used diligently and employers should give consideration to strategically, Courts have displayed the reason and circumstances in which an a consistent willingness to enforce employee’s employment has come to an end. post-employment restraints which are This may be relevant to both the potential risk well-documented and properly drafted, a former employee poses to an employer’s taking into account the nature of an business, and whether a court would be likely employee’s role. to hold that it is reasonable to restrain the 2. Employers are far more likely to be able employee from certain activities. For example, to rely on contractual post-employment a court will be more likely to enforce a broad restraints if they “uphold their end non-compete clause in circumstances in which of the bargain” during an employee’s an employee has suddenly resigned and is employment. found to have taken copies of the employer’s confidential information upon doing so, than in 3. When considering whether to invest in circumstances in which an employee has been enforcing a post-employment restraint, made involuntarily redundant. employers should have regard to the circumstances of the termination of This is because a court may conclude that it the employment in question. This may is “excessive” to prevent an employee from assist in an evaluation of what “threat” a earning a living in their chosen field when the former employee might pose, as well as employee’s employment has come to an end the employer’s prospects of success.

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