Even after an employment relationship has ended, there are several obligations that both employees and employers owe each other. As an employer, it is essential to understand the obligations that your employees still owe you, particularly if you have concerns after their employment has ended. Some typical situations might be soliciting or working with a previous client, starting a similar business, using intellectual property developed while working for you or sharing confidential information gained during employment. If you believe an employee has breached one or all of these post-employment obligations, this article outlines several steps you can take.
Contractual Obligations
Contractual obligations are duties both employers and employees owe to each other that are set out in the employment agreement. Some contractual obligations will typically survive the termination of an agreement. These obligations include:
- post-employment restraint, which prevents employees from taking or contacting clients after leaving your business;
- intellectual property clauses, which state that you will own any intellectual property the employee creates;
- confidential information, which states that employees cannot use personal information gained through employment after leaving the business; and
- termination, which sets out the employee’s post-employment obligations to return property and confidential information.
An Exit Deed or Deed of Settlement
A contractual obligation may also be in the form of an exit deed or deed of settlement signed by the parties. This deed typically sets out similar items as above. However, the deed usually provides an additional payment when asking an employee to sign an exit deed.
The settlement amount is an incentive for the employee’s agreement to sign. An exit deed may also indicate that the employee will not make any further claims or take legal action concerning the termination of their employment.
Common Law Obligations and Fiduciary Duties
Along with contractual obligations, employees also have additional duties that may extend beyond the terms of their employment agreement.
Implied and Common Law Duties
Employees have a common law duty of good faith and fidelity which can continue after employment has ended. A common law duty is not written in the contract, legislation, or regulation. Nevertheless, it has developed through case law (where situations are tested and assessed in court) and implied into the contract. So, for example, if your employee took your confidential information and shared it with their new employer, they would be in breach of this duty.
Additionally, employees also owe a duty of confidence to employers that restrict the employee from using or disclosing confidential information about the business. This duty may extend to the employee’s new employer or third parties.
Fiduciary Duties
Employees may continue to owe fiduciary duties to employers alongside an employee’s contractual and common law duties. A fiduciary duty is when one party must act in the best interests of another. For example, if employees gained knowledge of a confidential tender and benefited from sharing it with their new employer, they would breach their fiduciary duty.
Continue reading this article below the formStatutory Obligations
Employees also owe obligations to you under certain laws.
Corporations Act
Under the Corporations Act 2001, an employee of a corporation who has gained information as a result of their role must not improperly use the information to gain an advantage for:
- themselves;
- another person; or
- cause detriment to the business.
Intellectual Property and Copyright
When an employee leaves their employment, they may try to take copyright-protected materials to use in their new role or when setting up a business. However, employees are not allowed to use copyright-protected material without your consent as their previous employer. Therefore, their new employer may be in breach if they use copyright-protected material.
Skills and Knowledge Gained Through Work
In most cases, employees do not owe employers the obligation not to use the know-how and trivial information gained from employment and working in a particular industry. Therefore, employers can only stop employees from using some knowledge they have gained during their employment.
What If My Employee Breaches a Post-Employment Restraint?
The first step is to seek legal advice from a dispute or employment lawyer with experience in these types of disputes.
Once you assess the potential obligations breached, you should then issue a letter of demand to the employee setting out:
- their obligations;
- the breach; and
- your requested action.
The employee may refute the breach or ask to amend the statutory declaration. If you cannot negotiate with the employee, you can take further action, including seeking an injunction or damages.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
As an employer, it is vital to ensure your employment agreement covers detailed post-employment obligations concerning non-compete, non-solicitation, confidentiality, intellectual property, and termination. In addition, you must meet your obligations under the contract and post-employment obligations, such as final pay and record-keeping once employment has ended. Before taking action against an employee, you should adhere to any obligations and take action immediately if you believe your employee breaches any of their obligations.
If you think an employee has breached their post-employment breach, our experienced employment lawyers can assist you as a member of our LegalVision membership. You will have unlimited access to lawyers to answer questions and draft and review documents for a low monthly fee. So call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Your employees owe various post-employment obligations. For example, their employment agreement might contain restraints of trade and confidentiality clauses that prevent them from engaging in certain conduct.
You should clarify whether a breach has occurred with a lawyer. Then, you could issue a letter of demand to the employee to stop the breach. If the employee refuses the demand, you might go to court to seek an injunction or damages.
We appreciate your feedback – your submission has been successfully received.
