Week 4 Seminar Questions
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Feb 20, 2024
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Week 4: The Employment Contract, Formation & Content
Issues
•
requirements for valid contract: application to employment context
•
express terms: incorporation of documents incl awards & agreements, policies
•
terms implied by fact: business efficacy, custom
•
terms implied by law
Reading
Macken ch 4 Readings:
Byrne v Australian Airlines (1995) 185 CLR 410
Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120
Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177
Questions
1.
Explain the following contract law concepts, and when they are likely to be relevant
to the employment relationship, giving examples:
a.
Intention to enter into legal relations;
This intention is determined objectively - whether the parties have manifested an intention to create legal relations. (Ermogenous)
b.
Capacity; Those who don't have the capacity to fully understand the nature and extent of an agreement are usually protected by the court refusing to allow parties to enforce certain types of contracts against them.
c.
Offer and acceptance;
OFFER:
‘A clear indication by one person to another of a willingness to enter into a contract on certain terms’.
An offer must:
1) Be clear from words &/or conduct of the promisor that the promisor is willing to be bound to his/her promise without further negotiation and that a binding agreement would be made upon acceptance.
d.
Consideration;
To find out if a promise is enforceable, one must look to see what the other party - the person to whom the promise was given - has done in return for it.
e.
Genuineness of consent – mistake and misrepresentation; Occurs when the parties have reached consensus ad idem but they make the same false assumption in respect of a fundamental matter, such as they very existence of the subject matter or an important quality of the subject matter
f.
Duress and undue influence, unconscionability;
Duress is concerned with pressure applied by one party (the defendant) to induce the other party (the plaintiff) to enter into a contract or to modify an existing contract
Two key elements, set out in [
Universe Tankships Inc of Monrovia v International Transport Workers Federation
], must be met:
1. The pressure must be illegitimate
2. The illegitimate pressure must impair consent
3. The impaired consent must induce entry into the contract or variation to the existing contract
g.
Illegality (unlawful contracts).
What remedies are available in relation to these doctrines? Are these doctrines likely to be of practical use for an employee who is in dispute with their employer?
‘Where a party sustains a loss by reason of a breach of contract, the party is, so far as money can do it, to be placed in the same position as if the contract had been performed’ [
Robinson v Harman
]
Right to damages for any breach of contract (
Luna Park v Tramways
)
Nominal damages if no loss shown (
Luna Park
)
Onus on plaintiff (P) to establish loss suffered on balance of probabilities (
Luna Park; Commonwealth v Amann
)
Compensation for P’s own loss – not a 3rd party’s loss – Trident v McNiece
2.
Jill completed a media degree and after several years working in public relations was
employed as a Senior Reporter for the "Nightly News". At the time of her appointment
Jill understood (from conversations with the TV station’s personnel manager) that she
was to be the station’s Social Reporter but this was not stipulated in her written letter
of appointment. After two and a half years of faithful and satisfactory service, the
editor, one day, summons Jill to his office. He tells her that there is an emergency.
"There is a special sitting of the House of Representatives tonight in an important
matter and Joe, our political reporter, is in hospital following a sudden collapse. You
must attend and report on the outcome of the sitting". Jill says, "I was not hired as a
political reporter, I refuse". Can Jill refuse? What are the legal consequences if Jill is
dismissed?
J
ill can not refuse
In what circumstances is an employment contract subject to the doctrine of restraint of trade? What interests are involved? When will an express contractual restraint be likely to be upheld as reasonable? How is such a restraint enforced? When are employers most likely to rely on express contractual restraints? What is the practical effect of this doctrine in the employment context? NSW is the Restraints of Trade Act 1976 (NSW).
The doctrine of restraint is typically only enforced when its an express term in the contract of employment. It is essentially a clause that either restricts an employee's ability to work in a particular industry, for a competitor or alternatively from soliciting clients or employees
however It is generally only enforceable if it exists to protect legitimate business interests of the employer, it’s during a reasonable period of time and within a reasonable geographical scope . so it cant be a super broad and unreasonable clause.
Typically enforced by way of injunction to stop the breach. only for a specific period of time after In New South Wales, an employment contract may be subject to the doctrine of restraint of trade if it contains a clause that restricts an employee's ability to work in a particular industry or for a competitor for a specified period of time after their employment ends. The restraint clause must be a reasonable means of protecting the legitimate interests of the employer.
The interests involved in a restraint of trade clause include protecting the employer's trade secrets, confidential information, customer relationships and goodwill, and preventing employees from unfairly competing with the employer after their employment ends. The interest of the employee is in their ability to earn a living and use their skills and experience freely.
An express contractual restraint will be likely to be upheld as reasonable in NSW if it is no wider than necessary to protect the legitimate business interests of the employer
, is reasonable in terms of time and geographical
scope, and is not against public policy. The restraint must also be clear and unambiguous in its terms. The reasonableness of a restraint clause will be determined on a case-by-case basis.
The enforcement of a restraint of trade clause in NSW typically involves the employer seeking an injunction
to prevent the employee from breaching the clause, damages for any loss suffered as a result of the breach, or specific performance of the restraint. The employer must show that the restraint clause is reasonable and necessary to protect their legitimate business interests.
Employers in NSW are most likely to rely on express contractual restraints
in situations where they have legitimate business interests to protect, such as when the employee has access to sensitive information, trade secrets, or customer relationships. However, employers must be careful
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not to impose restraints that are overly broad, as such clauses may be deemed unenforceable.
The practical effect of the doctrine of restraint of trade in the employment
context in NSW is that it can limit an employee's ability to work in their chosen profession or industry for a period of time after their employment ends. While such clauses can be enforceable, they must be carefully drafted and reasonable to avoid being struck down as too broad or against
public policy.
For example, in the case of Whitham v Club Resort Holdings Pty Ltd [2007] NSWSC 646, the court considered whether a restraint of trade clause in an employment contract was reasonable and enforceable. The clause prohibited the employee from soliciting customers for a period of six months after termination of their employment. T
he court held that the restraint was reasonable and necessary to protect the employer's legitimate business interests, and therefore enforceable.
Similarly, in the case of Just Group Ltd v Peck [2016] NSWCA 148, the court considered a restraint of trade clause that prevented the employee from working for a competitor for six months after termination of their employment. The court held that the clause was reasonable and necessary to protect the employer's legitimate business interests, and therefore enforceable.
ISSUES = contract not updated so may not be applicable. These cases demonstrate that the reasonableness of a restraint of trade clause in an employment contract will depend on the specific circumstances of each case, and that the employer must demonstrate that the clause is no wider than necessary to protect their legitimate business interests.
3.
Clare is a financial planner working for a small firm in the Sydney CBD. Her
employment contract restricted her, for a period of three months after her employment
ended:
From soliciting firm clients; and
From carrying on a business in competition with the employer within a 7.5 km
radius of the office.
Clare starts her own business at Newcastle and whilst on a day off in the Sydney CBD
(one month after her employment ends), runs into Sam, a former client of Clare’s.
Sam asks Clare why she is no longer with the firm and Clare responds that she has
started her own financial planning firm. Sam becomes a client of Clare’s. Is Clare in
breach of the restraint? 4.
What is the legal test for other documents to become expressly incorporated into an
employment contract?
5.
Why were the workplace policy and management handbook held to constitute part of
the employment contract in Nikolich
? Based on this decision, will workplace policies
regularly be incorporated into employment contracts?
6.
In Farstad Shipping
, what perspective did the court take in determining how the
contract should be interpreted and whether the policy was part of the contract? Does
this decision provide a different approach to the question of when a policy is
contractually binding on the employer, compared to Nikolich
?