Employee restrained until September 2016

Tuesday , 28, June 2016 Leave a comment


In a recent case before the New South Wales Supreme Court, an employer has been successful in securing an injunction against an employee. The employee has been restrained from departing from his contractual obligations until 11 September 2016.

restrained

Facts

The case of BCG Partners (Australia) Pty Ltd v Hickey [2016] NSWSC 90 involved a senior broker who sought to resign from his employment.

The employee, Mr Hickey, was employed by BCG Partners (Australia) Pty Ltd (BCG) on 1 April 2006 for an initial period of three years. The employment contract was extended as follows:

  • with effect on 1 August 2011, the initial period was extended for a period of five years (that is, until 31 July 2016)
  • with effect on 1 September 2013, the initial period was extended for a further two years to 31 July 2018

The contract provided that either party could give notice to the other in writing to terminate the contract within the last two weeks of the initial period and the employment would subsequently end three months after the expiration date.

In the beginning of November 2015, Mr Hickey was offered employment with a competitor of BCG and resigned from his employment, providing only one months’ notice.

BCG subsequently commenced proceedings against Mr Hickey.

Decision

The Court held that the contract remained on foot and ordered that Mr Hickey be restrained from departing from his contractual obligations under 11 September 2016.

Whilst the Court acknowledged that it could order that the contract continue until 31 July 2018, given that the “actual employment” was over the period was shortened to September this year.

Reasons

  • the proper construction of the contract was that the parties could only terminate in certain circumstances – if it was an implied term that either party could terminate at any point by giving reasonable notice then there would have been no need to include express notice provisions
  • the test was whether a “reasonable businessperson” in the circumstances would understand the limited nature of the termination clauses – the answer to this was yes
  • the restraint in the contract was reasonably necessary to protect BCG’s legitimate business interest – as such, the Court decided to grant the injunction for no longer than what was reasonably necessary for the protection of BCG’s interests (i.e. time to recruit, promote junior employees, transition clients)

Lessons for Employers

The decision in this case shows that the courts are willing to remedy a breach of contract by employees and uphold a reasonable restraint. If drafted carefully, employers can use termination clauses and restraints as an effective tool for protecting the interests of the business.

Source : Kempstrang



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