Week 5 Seminar Questions

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Week 5: Employee Duties Issues • Status of implied terms: terms implied by law • Duty to disclose • Duty of fidelity and good faith • Equitable duties: confidentiality, fiduciary duties • Inventions, confidential information • Secret profits, emerging business opportunities • Confidentiality: whistleblowers’ exception Reading Macken ch 5 pp 212-265 Subject Readings: O’Brien v Associated Fire Alarms [1969] 1 All ER 93 Robb v Green [1895] 2 QB 315 Byrnes v Treloar (1997) 77 IR 332 SRA v Earthline Constructions Pty Ltd (1995) AILR 5-018 Questions 1. What principles govern the employee’s duty to obey the orders of their employer? What limits are imposed by the requirement that orders must be ‘reasonable’? Obligation to obey all lawful and reasonable commands given by the employer = mechanism which allows adaptation and change to meet the needs of the workplace. Commands by an employer to perform unlawful acts need not be obeyed. An employer cannot lawfully require an employee to do what the employee was not contracted to do. An employer cannot lawfully direct an employee to perform duties outside the scope of the agreed employment. What is reasonable will depend upon the particular employment. The employee’s duty to obey orders assumes a specific direction or required policy relating to the work that it is to be done. But this duty should be seen as an aspect of a broader duty requiring the employee to co-operate in order to get the job done. Explain when an employee is not required to a. change their place of work – discuss O’Brien v Associated Fire Alarms

The contrat may give the employer an express power to direct the employee to work at another locationl. The law will, in the absence of agreement , imploy some term about job mobility. But what is implied will depened on the facts. Ultimately, it may just be a question whether, in the absence of a job mobility clause in the contract, award or industrial agreement, it is reasonable to request the employee to work at another location. b. do different work the issue whether the employer is entitled to change the principal duties or the employee ’ s job is essentially concerned with the question of what are the express or implied terms of the contract of employment Will depend on facts of case unless express agreement. an employee may not be obliged to undertake tasks outside those agreed either initially or by subsequent variation, the employee will be obliged to adapt to different work method c. change the method of doing work. In Cresswell v IRC 386 the Board of Inland Revenue required staff to operate a new computer system to facilitate the work of tax assessors. The plaintiffs refused to operate the new equipment arguing that it constituted a breach of their employment contracts to introduce the new system without their agreement. Walton J held that employees are not entitled to preserve their working obligations completely unchanged from the time they first start work. Provided that the nature of the job has not fundamentally changed the employee cannot object if instead of using paper and pens he or she is now required to use a computer. 2. When will an employee be liable to the employer for failure to exercise adequate care and skill? How is the standard of care required by an employee determined? When is an employee required to indemnify the employer for loss occasioned by the employee’s own conduct? An employee has a general duty to exercise reasonable care in carrying out the employment. This obligation is implied as an incident of the contractual relationship and is also impose independently by law of torts. Liability: An employer could claim contribution from the employee which would usually amount to 100% except where emolyer is not blameless. When the harm results from the employees conduct duting the course of employment such a where employee injusrs a. fellow worker, both the employee and employer will be liable to a fellow employee or third party. The common law rule that an employee 336 is liable to indemnify the employe r for torts committed within the course of employment is subject to statutory modification in some States. In New South Wales, Northern Territory and South Australia, an employer

who is vicariously liable for the employee ’ s wrongdoing is required to indemnify the employee and the employer cannot recover contribution 337 an employment contract can contain a provision whereby the employee expressly agrees to indemnify the employe r for certain kinds of losses, as for example, a portion of the bad debts incurred by the employer arising from transactions effected for clients for whom a. Explain the employee’s contractual duty of fidelity and good faith. Not easily defined incl all broad general duties –‘every aspect of an emplpoyees duty towards the employer, varying according to the nature of employment’. It is not a mutual duty. It can be said that any act inconsisten or injurious to the proper performance of an employees duties under the contract will amount to a breach of the duty. b. What are its limits? Explain the relationship between common law and equitable dimensions of the employee’s duty. The equitable action also provides more extensive remedies 435 than the contractual duty c. How did the judges explain the source and content of the duty in Robb v Green ? ‘there will always be an implication in the contract that the employee willmnact in good faith towards the employer The defendant, who was employed as a manager, secretly copied a list of the names and addresses of his employer ’ s customers and then set up a similar business for himself after he had left his employer. He used the list for this purpose and it was held that he was in breach of his obligation to observe good faith. It is clearly established that employees cannot make use of an employer ’ s time in a conscious and secret manner to advantage themselves in setting up in business in opposition to the employer. d. Why was the employee in breach of her duty of fidelity in Byrnes v Treloar ? the duty of fidelity and good faith to preclude employees from commenting on or speaking adversely to outsiders about their employers business wvene where no disclosure or use of information is involved. e. When does an employee owe fiduciary duties to their employer? What approach to this question was taken in SRA v Earthline Constructions ? What are the consequences of a finding that the employee was a fiduciary? Fuiduciary obligations sit side by side with contractual obligations. Must be a fiduciary relztionship  the fiduciary undertakes or agrees to act for or on behalf of or in the intrests of another person  Secondly, where a person (fiduciary) has undertaken to act in the interests of another (beneficiary), equity requires the fiduciary to act in the interests of the beneficiary rather than in their own self interest. hether there is a fiduciary relationship depends on the circumstances of the individual case. There is no exhaustive definition of what factors determine whether there is a fiduciary relationship, so it is not sufficient simply to point to an employment relationship.

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Fiduciary obligations are also subject to the terms of any contractual arrangements between the parties: “The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. 3. Briefly explain the principles governing existing employees’ implied duties i n relation to: a. soliciting customers, working for competitors Typically if employees during the employment solicit the employer ’ s customers for the purposes of establishing a competing business, or divert the employer ’ s customers or business opportunities to their own business, this will be a breach of the employees duty of fidelity. he law regards it as unlawful to undertake the following: (1) working for a competitor while still employed; (2) personally competing while still employed; (3) concealing or diverting matured or maturing business opportunities; (4) misusing the employer ’ s property, including confidential information and assets; and (5) taking the steps necessary to establish a competing business so that it is “up and running” or “ready to go” as soon as the employee leaves the employment. b. use of information acquired during employment (contractual duty) the implied duty of loyalty protects the employers confidential information. Where information is not in the public domain. The employee ’ s contractual duty of loyalty during the employment extends to confidential information. An employee can ben in breach of implied duty of loyalty if during the employment, without authority, misuses or discloses confidential information. c. poaching of employees These conveneant prevent the employee ftom soliciting other employees to change employment. This restrain may be considered necessary to protect the employer ’ s interests by retaining employees critical for the continued success of the business 595 or employees with access to confidential information 596 or where employees have significant client connectcion. d. work in spare time ('moonlighting'); bribes and secret commissions Where there is no exclusive service agreement, if employees set up, or are involved in, a business in direct competition with the employer in their spare time to the detriment of the employer, this may be in breach of the implied duty of good faith .But it would not be a breach and there would be no detriment to the employer if an “odd job” employee worked for another competing business doing “odd jobs” in the employee ’ s spare time Cementaid (NSW) Pty Ltd v Chambers , 651 Spender J summarised the principles by suggesting that four questions are relevant when determining whether or not an employee is acting outside his or her duty to the primary employer by taking a second job:

(a) Is the second activity incompatible with the fulfilment of the employee ’ s duty to [the] employer? 652 (b) Does it involve an opposition or conflict between the employee ’ s interest and the duty to [the] employer? 653 (c) Does it impede faithful performance of [his/her] obligations to [the] other employer? (d) Is it destructive of the necessary confidence between employer and employee? The employee who accepts a bribe or secret commission in respect of the employer ’ s business will almost certainly commit a criminal offence under either federal or state legislaton. e. answering questions put by the employer An obligation to answer questions arises out of the contract of employment, either as an implied term or as a consequence of the duty to obey lawful and reasonable orders or more generally as an element of the duty of fidelity and good faith. A failure to answer questions or the dishonest response to questions which an employee is properly required to answer could be so serious as to render the employee liable to dismissal. 4. Is it reasonable that the common law presumes that property created “in the course of employment” should be owned by the employer? Why is this considered to be a sufficiently necessary term implied by law, when it could be expressed in an agreement by way of the employment contract if an employer wishes to claim ownership. he issue of ownership of intellectual property is likely these days to be the subject of express contractual provision 629 in which the employer bears the risks and costs of innovation with the employee trading-off the potential benefits of the intellectual property for the security of paid employmen The ownership of intellectual property may be the subject of workplace policies incorporated into the contract of employment, see [4.480]. Whilst this may provide greater certainty and benefit to the employer, the use of contractual clauses giving employers property rights to employee inventions, other intellectual property or simply creative ideas short of patentable inventions, 632 turns “human capital and intangibles of the mind – knowledge, experience, skill, creativity, and network-into property”. 5. What is the scope of the equitable duty of confidence and when does it apply in the employment context ? The equitable duty of confidence can also provide remedies for the wrongful use 515 and disclosure of confidential information. A plaintiff in a claim for breach of confidence must satisfy the following requirements:

(1) [the confidential information] must be identified with sufficient specificity; 517 (2) it must have the necessary quality of confidence 518 and not be common or public knowledge; 519 (3) itmusthavebeenimpartedincircumstancesgivingrisetoadutyofconfidence;and (4) there is misuse, or threatened misused without the consent of the person enetitled to be protected. a. What information learned during employment is subject to a duty of confidentiality? The action will protect against the disclosure of personal information gained in confidence, the disclosure confidential damaging information concering business interests, developed creative ideas and what has been broadly defined as trade secrets. b. What duty is now owed by an ex-employee to their former employer? Duty of confidentiality – the equitable duty can continue after the employment has come to an end provided the information is not in the public domain. c. When does the common law protect employee whistleblowers? Discuss the contribution to the common law made by Lion Laboratories v Evans . Australian common law protects employee whistleblowers when they disclose information that reveals wrongdoing or malpractice by their employer, and the disclosure is in the public interest. The protection afforded to whistleblowers is important as it encourages employees to come forward and report illegal or unethical conduct without fear of retaliation by their employer. The contribution to the common law made by Lion Laboratories v Evans is significant as it established the test for determining whether a disclosure is made in the public interest. In this case, Mr. Evans, who was a sales manager for Lion Laboratories, disclosed information to the police that some of the company's breathalysers were inaccurate. Lion Laboratories subsequently dismissed Mr. Evans, and he brought a claim for unfair dismissal. The court held that Mr. Evans' disclosure was made in the public interest as it revealed a danger to the public and was not motivated by personal gain. The court also held that the public interest test required a broad interpretation and that it was not necessary for the disclosure to affect a large number of people. This test has since been used in numerous cases to determine whether whistleblowers are protected under the law. The Lion Laboratories v Evans case also established the principle that the motive of the whistleblower is irrelevant in determining whether they are protected under the law. As long as the disclosure is made in the public interest, the whistleblower is protected even if their motives are not entirely pure. In conclusion, the contribution of the Lion Laboratories v Evans case to Australian common law is significant as it established the test for determining whether a

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disclosure is made in the public interest and affirmed the importance of protecting whistleblowers who come forward to reveal wrongdoing or malpractice by the employer. 6. GDP is a firm of structural engineers, which specialises in the design of pole houses to be constructed on steep unstable sites. The techniques used by GDP were well-described in the engineering literature, although the experience gained by the firm’s engineers made them the recognised experts in the region and allowed them to use the techniques in different ways. Ivan, an engineering student, was employed by the firm as a casual office assistant in 2011. Although his original duties were mainly clerical, after a few months Susan, one of the firm’s partners, allowed him to assist her in drafting structural plans and drawing up building specifications. After graduating in 2013, Ivan continued to be employed by GDP, this time as an engineer, though without any express terms other than an agreement over his salary. In his student days, Ivan had befriended Nick, a builder. Ivan frequently told Nick about some of GDP’s projects and enthusiastically described the structural solutions, which the firm was using when dealing with difficult projects. Nick owned a steeply sloping block of land and wanted to build a house on it. During his annual holidays in 2012, Ivan helped Nick to design and construct the footings for the house and also helped with further building work on the house. Ivan showed Nick some tips on the construction of pole houses, which he had picked up while he had been doing his casual drafting work for GDP back in 2011. In September 2014, when the two were drinking together after work, Ivan had revealed to Nick the costing formula used by GDP when charging clients. Ivan left GDP in December 2015 and began working on his own. In March 2016, Nick was working on the submission of a tender to build a new shopping centre at Shaky Heights. Without telling him about the proposed tender, Nick questioned Ivan in order to obtain detailed engineering data which he then used to calculate building costs for the Shaky Heights project. Nick was able to use both the engineering data and the costing formula to submit the lowest tender and thus win the Shaky Heights building contract. Nick then engaged GDP as structural engineers for the project. As he knew their costing formula, he was able to minimise the amount which GDP was able to charge. Susan has just found out about the relationship between Ivan and Nick. She is furious that GDP’s expertise in the region has been undermined by the spread of its knowledge to outside parties. The partners are also concerned that the firm has not been able to earn as much from the Shaky Heights project as it could have done if the costing formula had been kept secret. Advise GDP about their remedies against Ivan and Nick. Duty of confidentiality breached 7. Steve is a travel agent with Go Flight Pty Ltd, which operates a chain of travel agencies in retail shopping centres. Steve is at Castle Hill shopping centre. A key component of its business model is in-store consultation with clients. Go Flight implements a mandatory vaccination policy for all customer-facing employees, that is employees in the travel agencies and not at Go Flight head office in the Sydney CBD. Go Flight’s policy provides reasons for the mandatory vaccination, which includes client health and safety, particularly given that clients may not attend stores because of the risk, clients are travelling to

countries that may require negative RAT/PCR tests prior to or on arrival, and that some travel insurance policies do not cover COVID-19 related health conditions. The policy also makes provision for a consultation process with staff, and the opportunity (if available) to be re-assigned to head office if the staff member has a medical exemption from vaccination . There is no public health order in place mandating vaccinations, and the policy is not an express term of the employment contract. Steve refuses to be vaccinated, citing libertarian political beliefs around bodily integrity and psychological issues, including severe anxiety, from receiving a needle. Steve’s anxiety is supported by his medical practitioner. G o Flight offers Steve an administrative role (on the same pay) at head office in Sydney, which is rejected. Steve cites the additional travel from Castle Hill to Sydney CBD as a reason for his rejection, arguing it is an unreasonable direction. Steve also does not respond to repeated requests from Go Travel to attend an independent medical examination to determine a medical exemption from vaccination. Go Flight followed its consultation process, but Steve refused to participate. Go Travel requires Steve to return to work vaccinated at Go Flight, Castle Hill on 1 February 2022, but his lawyer writes to Go Flight the day before citing that the directions provides by Go Flight were unlawful and/or unreasonable, and that this constitutes a repudiation of the employment contract. Advise Go Flight as to whether it has breached the employment contract with Steve. What provisions could have been expressly included in the employment contract to minimise legal risk in the circumstances?

Week 5 Seminar Questions

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