If you have concerns that your employee has breached their employment agreement, it is essential that you take action as quickly as possible. Breaches may occur at all stages of the employment relationship and can, in some severe cases, result in significant loss or damage to your business. This article will outline some of the common breaches of contract by employees and offer some helpful guidance on the steps you can take as an employer to address and manage them.
What Does a Breach of Contract Look Like?
As an employer, it may not always be obvious when an employee has breached their employment agreement. For this reason, you must understand the operation of your employment contracts and be aware of the employee behaviour or conduct that may put your business at risk.
A breach of contract occurs when a party fails to meet their obligations as agreed and set out in the contract terms. A breach can occur through a positive act (i.e. taking some form of action or doing something prohibited by the contract) or by an omission (i.e. failing to do something required under the contract).
Your employee may be in breach of their employment agreement if they:
- mislead you about their right to work in Australia or holding necessary qualifications;
- divulge your business’ confidential information without consent;
- misuse the intellectual property created in the course of their employment;
- fail to follow your lawful and reasonable directions;
- fail to give the correct notice of resignation; or
- solicit, or attempt to solicit your clients or workers within their period of restraint.
Breaches During the Employment Relationship
If you suspect your employee has breached their employment agreement, it would be prudent to conduct an investigation and provide the employee with an opportunity to respond to your concerns. The steps you take will depend on the nature and severity of the alleged breach.
Examples of Breaches
This section details common breaches and possible steps you can take as an employer.
If your employee fails to follow your lawful and reasonable directions, and this failure is persistent or regular, they will likely be in breach of their employment agreement. You might initially address this type of breach with disciplinary action. If your employee shows no remorse or improvement after a disciplinary meeting, you might decide to terminate their employment.
Importantly, you want to mitigate the risk of an employee bringing a claim for unfair dismissal against your business. As such, you can first address any issues with your employee through informal and formal procedures and provide them with an opportunity to respond to your concerns. You may want to consider providing a written reminder or warning to your employee to put them on notice that any further failure to comply with your lawful and reasonable directions may lead to termination of employment.
Stealing a business’ confidential information will likely amount to a serious breach of contract. In this situation, it is important to take swift action to reduce loss to your business. Whilst termination of employment for serious misconduct will likely be an option, ensure that you conduct a thorough investigation to confirm the breach. You may also consider the following:
- sending a letter regarding the suspected confidentiality breach;
- seeking undertakings from the employee;
- seeking an injunction; or
- commencing legal action for damages.
In any case, you should speak to an employment lawyer about what steps you can take to address your employee’s breach of contract.
Continue reading this article below the formBreaches at the Time of Resignation
If your employee resigns from their employment, they will likely have obligations in their contract regarding notice. They may also have particular restraints on their conduct following employment.
For example, suppose you run a retail business. After six years in your business, a supervisor resigns from her role. Her contract states there is a four-week notice period in place. After working one week of this period, she has failed to return to work and has not communicated with your business.
You can find the required notice period an employee must give upon resignation in the applicable:
- modern award;
- enterprise agreement; or
- employment contract.
In this situation, you may be able to initiate legal action for breach of contract, seeking monetary damages for your employee’s unworked notice period. However, this may be a complex or costly process.
Some modern awards allow you, as an employer, to withhold an amount from your employee’s final pay if they fail to give their required notice under certain conditions. The common allowable deduction is one week’s wages if the employee is over 18, and the deduction is reasonable.
Tips to Mitigate the Likelihood of Breaches Occurring
An employee’s breach of contract cannot always be prevented or predicted. However, you can take steps to reduce the risk, including:
- ensuring all employees have written employment agreements;
- ensuring directions are well communicated to employees, either via a policy or otherwise in writing;
- revisiting and revising your employment agreements regularly to ensure they appropriately reflect the employment relationship; and
- seeking legal advice as soon as you have concerns about an employee’s behaviour.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
If an employee has breached their employment agreement, you may be able to address the problem internally and preserve the employment relationship. Otherwise, you might seek a remedy from your employee for any loss or damage caused by the breach.
If you need assistance understanding your options as an employer, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Having a written employment agreement that clearly defines confidential information and stipulates appropriate use will best protect the business.
Starting legal action is generally a last resort for resolving workplace disputes. Depending on the nature and severity of the breach, you may want to consider disciplinary measures or directly communicating and settling with your employee first.
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