The #1 Thing That matters About Employee-Employer Relationship Law

Action.

Okay. Hello again. Welcome. After a bit of a break, Sean has got some interesting news about that, but my name is Boris Fisher and.

We have the virtual pub.

We've got Sean and Angela Backhouse. Welcome, everyone. We have a special guest, which is Angela. She's from Chamberlain's law firm. She's got over 10 years of experience in various different subject matters around conveyancing, corporate and business transactions, commercial litigations, bankruptcy wills and financial services. But what I found the most interesting was that in 2017, you were awarded the Businesswoman of the Year in Canberra. How exciting was that?

Yes, it was a shock, but it was definitely an honour.

Beautiful, beautiful. Okay, so, Sean, I'll get you to set the scene because you're doing very well and tell us why we're here.

No worries. So, first of all, thank you for joining us. And as Buzz mentioned, we had a bit of a break and it was a positive break. I had my third baby girl born four weeks ago, so apologies in advance if you hear some crying in the background, although I asked her not to do so. So thanks, Angela, for joining today. And today. Well, so we wanted to, after a lot of talks and chats with a lot of executives in many workplaces, we wanted to know and talk about what's called employment relationship. And as we all know, the employment relationship is the legal link between employer and employees.

Employees.

It exists where a person perform work or services under certain conditions in return for the salary or any other compensation. And our questions, and when we talked with a lot of executives, we wondered, when things go wrong, who is liable, what's happened, who is responsible, but things not going the way they should go or the wrong direction, who's responsible, who is accountable when things not going as planned. So I understand that you are an expert in the area.

With a sort of like, let's get the baseline question. What is employment law?

Employment law is basically the government's way of intervening in the relationship between an employer and employee. It's been a practice of our society for hundreds of years to pay someone, whether it's money or in other ways for. For them to provide a service for you. And that's well before there were ever any laws in place to deal with that practice. And in fact, as a society, we did that for a number of years without there being any rules or regulations around that. It's only in more recent times that the government in various countries have decided to intervene in that relationship and create rules that revolve around that relationship to determine what people can and can't do when they employ someone to provide a service for them.

Okay, excellent. So let's get to the crux of the matter. So we know that the employer is responsible for everything. Now it could be wrong, but responsible to their employees behaviour. So the question is if they are deceptive or they're misleading in their advice, who's liable in this case?

Look, it comes down to the employment relationship and the contracts involved and the circumstances around it. So if an employee has been given a task by the employer to go and do, and that employee then provides incorrect advice or is negligent in some way, then the normal course of events is that the person who has received that negligent advice, who has therefore gone on to suffer damage because of that, is most likely going to make a claim against the employer because they're the ones who they've engaged to provide that advice and the employer has basically just delegated that to their employee, but still has the responsibility ultimately between the employer and the client or customer who has engaged those services. So from the customer's point of view view, they're going to have a claim against the employer in most circumstances.

Okay, so that's so irrespective what training has been provided, policies and rules and behaviors of what is deemed as acceptable, so even though they're fully aware of it, the employee never is able to step away from it, Would that be correct?

So this. Oh, sorry, both, sorry, can you repeat that last question.

So we would probably.

So say based on what you just said, so. So go ahead Sean.

Yes, so I think what boss means that accountability from the individual, irrespective where they understand or didn't understand what the organisations instruct.

So there's obviously going to be different outcomes depending on the specific circumstances. If an employee has been so reckless that they have gone completely outside of the rules and requirements of the employer, of which they were well aware of and trained in and that kind of thing, and essentially stepped outside of what is or should be their role as an employee, then they could potentially find themselves personally liable to that customer for the conduct that they've engaged in. The reason that often the customer and client won't necessarily pursue the employee for that is because normally they'll look at the employer as being the one who's likely to have more money to pay a claim for damages and likely an insurance policy to cover it as well, whereas the employee is going to be less likely to have the funds to compensate them. And so therefore you don't see many claims there as well as there being that extra hurdle that would have to be met in order to prove that the employee has been so reckless that they just completely disengaged with the requirements of their employer. And went off on a completely different tangent. And that's a pretty high hurdle that the customer or client would need to satisfy. That's not to say that if a claim was made by the customer against the employer, there's a separate issue there between the employer and employee. If the employee has done something that's so significant that they've caused financial loss to their employer, and they've gone outside of the rules and regulations and requirements of their role, they've not complied with the internal policies, procedures and requirements and directions, then there's definitely going to be a course of action between the employer, employer and employee in terms of their ongoing employment. And that's going to be a separate issue.

A major factor in that scenario. For example, if the employee did something on purpose or by accident.

That'S always going to be a factor because if they've done something intentionally, then they're probably doing that intentionally to harm either the customer or their employer. And that's going to be a very relevant factor. It could even be to the extent of it being considered fraudulent, and that becomes an even more serious matter as well.

Okay.

I've got a question which relates to the fact that when an organization hires new people, they often don't realize that they're bringing potentially some confidential information with them from the previous organization. How is that dealt with? Typically.

So it's really a question about the relationship between the former employer and the employee and what they are and are not permitted to do once they've left that employment and gone somewhere else. So if the former employer feels like there is an issue, the first point of call is going to be seeing whether they had anything in their contract of employment with the employee which actually prevented them or prohibited them from either taking that information or disclosing that information to somebody else. Good employment contracts will include clauses such as confidentiality provisions, intellectual property provisions, and sometimes restraint clauses as well. And all of those clauses are going to be very relevant in those circumstances. Now, if it's to the extent that they've actually taken intellectual property from that employer and then gone and used that in a new job, there is a potential claim between the two employers for use of intellectual property. But the former employer will then need to establish that they hold intellectual property in that particular asset, whatever it is. And that that comes into IP laws, which I'm not going to go into any Detail, because it's not an area that I cover. But there is a potential claim there, particularly if the new employer receives that IP knowing that it was used by the former employer and still goes ahead and uses that.

Yeah, Sean, you had a question? Sorry about that.

So obviously during this session we try.

To focus on the business side that.

Try to protect itself against harm that potentially can come from the employees. I could say I'm a developer, I'm working with that company since it was established. I'm one of the founders, although I didn't put a dollar into that. I didn't invest, but I was hired and I helped the organization to grow. My code, my thinking, my methodologies, my creative mind brought the company to that value. Now they're letting me go. What the organization should do in such a situation where in one hand they know this is a very valuable, well, valuable in terms of knowledge employee, but also he becomes very powerful that he's basically holding a lot of keys to the kingdom. So how organization should protect itself in one hand, you know, it works in one direction to empower and encourage the employee to be more creative, to contribute more. And of course it can come within a form of salary or other incentives. But who is measuring the ideology of that person? Maybe he wants to become one of the people that will enjoy the exit or feel that he owns part of the company, how that is managed within their employment relationship. When it comes to that.

There'S a number of issues there to consider. And it's interesting that you use that as an example because we had a case very similar to that recently where we had to assist an employer exit an employee who had played a crucial role. Well, the question of how crucial they had been was an area of dispute. But the employee believed they played a crucial role in building the business and making it what it was. There's a few areas we have to look at. First. You need to look at what is the terms of the original employment agreement and any variations that have been made to that employment agreement. And that's why it's so important even for start up businesses who don't have many employees or don't think that their business is worth much to make sure that those agreements with their employees at the outset are addressing all of these potential issues in the future. You're setting up a business with the aim of making money and making it successful. So you have to anticipate that and put your contracts in place in anticipation of that as well. You might say, look, there's no point in putting restraint in here because they're not going to do any damage to my business. There's not much business here. But in five years time when they leave, that can be a completely different story. So your contract that you have with them is going to be completely vital to how you then deal with this going forward. There's a different element to it which is managing the expectations of the exiting employee. If it is that you've set everything up properly and it's clear in the employment arrangement that this employee is not entitled to any interest in the business and all they're entitled to is your standard termination payout in accordance with the legislation. Whether it's redundancy or otherwise, you've got to manage the expectations of the employee. And so there could be circumstances where the employee is saying, yeah, but I contributed to all of this and I should be compensated for that and otherwise I'm going to jump up and down and cause problems. So it then might become an issue for the employer to have a confidential discussion with them, potentially come to some sort of other resolution with them. So they maybe give them an extra little bit of a payout or something like that on the basis that they also sign a deed of release that says we're walking away now, we're not going to cause any issues anymore, there's going to be non disparagement clauses to say we can't talk about this to anyone and everyone's happy and that can, even though it might cost the employer more than legally they're required to pay, it can give them that knowledge that this issue has now gone away, everyone's happy and we can move on.

I'm halfway. We're halfway the session.

The two questions which is based on when you board employees and when you terminate on, please. So there's got to be an expectation but also some form of signing of a deed when they leave, can and can't claim. What about trusted business partners like third party that may have access to the organization's trusted sensitive assets and so forth? Would that be dealt in the same manner like you would do with an employee?

Are you talking about someone who's actually part of the ownership structure of the business or someone who's a third party?

Third party contractors that provide services.

Well, that then comes down to the contract of services that you have. So in a lot of instances, and it should be the case, the service provider should have standard terms and conditions in one way or another. However that is documented and depending on what industry they're in, that actually sets out the rules and requirements of that contract. So I can use the legal profession as an example of that. Because when you engage a lawyer, we are obligated under our professional conduct rules to issue a cost disclosure to you which has certain terms and conditions and that sets out the basis upon which you're engaging us. So that if there is a dispute and you decide you don't want to use us anymore, we're obligated not just under our professional conduct rules, but also under our costs agreement to deal with that information in a particular way. And that applies throughout the board, no matter what profession you're dealing with. Not all professions are governed the way that lawyers are. Some, you will find, don't have any sort of governing body. And then in those instances, you are relying heavily on that contract for services that applies. And we do find there are a number of industries where they don't actually use any sort of contract for services. And that's where you can end up in a lot of dispute. So particularly small businesses who may be in, have originally been in startup mode and have grown, have not necessarily necessarily adapted their terms and conditions for their customers to deal with these potential issues. And they will often come to us when it gets to a dispute situation where we have to deal with the dispute. And at the same time they say, can you review our terms and conditions to make sure we don't have this issue?

Sorry, you go first and I'll go second.

You got something else that you wanted to add?

So in my previous life, I was a developer and we gave that example and now we all know the Wolf from Wall Street. So I'll be the Wolf from Pitt street in Sydney. And I'm working in a very good and large accounting firm. And by the years I established a lot of good relationship with a lot of accounts and they all trust me. We go to a lot of lunches and dinners and they invite me to very exclusive events and I'm very friendly with the families. I'm developing trust and relationship. Now. The account firm decided to let me go, which I'm very happy to say goodbye. But I'm taking my contacts with me because they know me, they are on my phone, they're in my head, I know them, I manage their accounts many years and I'm moving to maybe Competitive or another company. Now, when it comes to ip, obviously stealing or taking the code of a software or any device is against the law because this is the former employee ip. But knowledge, contact, experience that I gained throughout these years, how that is protected or should it be My ip, my personal ip.

So this is something that you should have negotiated with your employer when you started your employment. Unfortunately, it's not always something that employees think about at the time that they start. Professionals who have jumped from a few jobs and have built up that database in advance will often think of that when, when they're negotiating their employment contract. But others who are just starting out, who maybe don't have that buildup of network yet, may not think about it. And then when they leave in five years time and they have built up that network, then it becomes an issue. So again, it comes down to what's in your employment agreement. You can build into your employment agreement certain provisions so you can have what we call a non compete. And that effectively says that when you leave my employment, you can't go and compete with me by contacting my customers or my employees and trying to get their work. But if they come to you, if they come to you at your new place, there's nothing I can do about that under a non compete clause. So you can't go out there and try to get them to come to you. But if they just do that willingly and they find you on Google or LinkedIn or whatever, then there's nothing I can do. The other alternative is a restraint clause and that's much more heavier. And that's going to basically prevent you from being in a business that competes with me to a certain area over a certain period of time. And whether those people come to you directly or you go to them, you just can't do that at all. Restraint clauses have been subject to a lot of litigation. The courts in general, people don't like them very much because they see them as actually restricting your ability to make money in a profession that you're trained in. So it's very important when you're putting a restraint clause in from an employer's perspective that that restraint is actually going to be a reasonable one that can be enforced by the courts. And that's why we do recommend when you're putting restraint clauses in a contract, that you get legal advice in relation to that to make sure it is going to be enforceable.

Well, I wish we could have that device for Men in Black. Whenever you leave the organization, look at that for three seconds. And then.

I have a question and it's actually more actually maybe I may get strong to paint the scene, but organizations are going more and more by gathering evidence about what they employees are going to do. The question is what is deemed as evidence? Because now with technology you can actually capture their actions. You can see what they're doing on the screen. This has been done in so many different ways. What is deemed as evidence that you could actually take to court and say, look, he did something that we purposely or asked him not to do, and yet we've got evidence that he, he or she did that.

Look, it's really important. It's important to make it clear in your policies, procedures, or even in your employees.