A professional services employee sets up in competition with their employer and breaches their employment contract. Can we terminate?

A small business client recently called me concerned that one of her staff may have set up his own business in competition with the employer’s services.

The employee worked remotely and visited clients in their homes as an occupational therapist. The number of clients he had been logging had dropped in recent weeks.

After some searching, they found the employee had set up their own website and facebook page using only his first name. Very clever!

There was no hard evidence at this point whether the employee had taken clients from their employer and serviced them through his own business.

However, regardless of that, the employee had breached their employment contract in setting up their own business offering the same services.

Access to the business email system and database were immediately stopped.

We drafted a letter of termination based on the employment contract breach which also included a stern threat to take legal action and seek damages if it was found the employer’s clients had been poached.

The upside (if you can call it that) was that the employer had issued comprehensive employment contracts on engagement.

What if the employer had not issued comprehensive employment contracts?

That would have tied our hands substantially and made a termination more uncertain.

I have come across too many employers with ineffective employment contracts or a one or two page appointment letter. (One contract made no mention of the employee undertaking a role or being required to do any work!) 

In relation to the above example the key clauses that protected the business were: 

• A non-compete clause (while employed) 
• Confidential information clause
• Post employment restraint clauses

The restraint clauses need to be carefully written as a court will not enforce a contract that prevents a former employee from earning a living in the broader area where they live.

You are (generally) able to seek to protect your business relationship with your current clients (for a limited duration) but you will not be able to unilaterally protect your ‘turf’ – as in the area where your business normally draws its clients.

The employee may be able to take action in the Fair Work Commission following termination but a comprehensive employment contract will provide a substantive defence – particularly where it includes termination clauses for breaching the terms.

So how valuable is your confidential business information, your clients or their private information?

If you require assistance in reviewing your employment contract or seek to implement new ones, please contact Michael. Hunter Employee Relations has developed comprehensive template contracts.

Kind Regards
Michael Schmidt
M 0438 129 728
[email protected]
www.hunteremployeerelations.com.au

Industrial Relations - Employment Law - Workplace Performance

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