Has your employee begun employment with a competitor soon after their resignation? Are you worried that your employee has disclosed your business’ confidential information? As an employer, it is your right to bring a claim against your employee if they have breached your employment agreement. If you are considering taking legal action against your current or former employee, it is best to have a firm legal understanding of all the requirements you will need to meet. This article sets out five steps you should check before taking action for an employee breach of contract.
1. Is There a Contract?
2. Has Your Employee Breached the Contract?
Generally, your employee can breach their employment contract in two ways.
Actual Breach
In the first instance, an actual breach involves your employee failing to perform their obligations under a contract. For example, an actual breach can arise if your employee:
- solicits a client contrary to an agreed non-solicitation clause;
- fails to give you proper notice of their resignation per their employment agreement; or
- discloses confidential information contrary to their employment contract.
A failure to perform an obligation can occur when your employee:
- fails to perform their obligations under the contract terms altogether;
- performs their obligations but not to the standard specified in the written contract; or
- performs their obligations but does so after the time specified in your contract.
Anticipatory Breach
In the second instance, an anticipatory breach refers to an employee’s inability to fulfil their obligations. To be in anticipatory breach of a contract, an employee must indicate their intention to ‘repudiate’ or ‘walk away’ from their obligations. In any event, it would be wise to seek legal advice to ensure that a breach can be made out.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
3. Is the Term That Your Employee Breached Clear?
Some contractual terms can be ambiguous, and their meaning unclear. If this is the case, you will need to provide the court with an argument about how to interpret the clause. Accordingly, it is best to consult a lawyer who can advise you whether the courts have interpreted a similar term to the one you allege your employee breached.
You should note that where a term in your employment contract is uncertain or vague, you cannot enforce it. That is because there will not be a ‘meeting of the minds’ between both parties if they have not agreed on the contract’s terms. For this reason, good drafting and clarity between the parties are essential to ensuring you can enforce your employment agreement.
4. Are There Any Time Limitations?
If you believe your employee has breached your contract, it is vital to lodge your claim before it is too late. Like most kinds of legal action, you have a limited amount of time in which you can sue. Therefore, it is important that you fully understand the time limits (and any other limitations) that exist on your claim to achieve the best possible outcome. For example, you generally have six years from the date the breach occurs to commence proceedings for breach of contract in NSW. In saying that, you should immediately seek legal advice if you believe that your employee has breached their employment contract.
5. What are My Damages?
The standard remedy for breach of contract is monetary damages. That is, the court will order money as compensation for losses resulting from the breach of contract. In some circumstances, you may receive an injunction that stops your employee from doing certain things. For example, the court might grant an injunction if your employee is likely to continue leaking your business’ confidential information.
Since commencing legal proceedings against your employee can be a time-consuming and costly process, it is important to understand the financial and emotional costs involved with litigation.
Key Takeaways
Contracts are diverse and complex legal documents, and deciding whether or not you can sue an employee for a breach of contract can be difficult. If you are unsure whether you can satisfy the above steps, then seeking an experienced lawyer’s assistance is prudent to achieve the best possible outcome.
If you need help dealing with a potential breach of contract, 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
A non-solicitation clause prevents an employee from soliciting clients and staff from your workplace.
This will depend on various factors, including the type of information your employee disclosed and their obligations under the employment agreement. In this instance, it would be wise to seek legal advice to assess your options.
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