For information on some of the other mistakes that we often see in employment contracts, check out our blog post: Three of the biggest mistakes made in employment contracts
All too often I see the fall-out from contracts that are ‘one size fits all’ which, when a dispute erupts, fails to effectively protect the employer from loss. When the loss comes from an employee who decides to ‘steal’ the information and resources of the employer, the impact can be devasting to a small business. Two of the biggest problems are:
- Inappropriate restraint of trade clauses.
It might be appropriate and reasonable to restrict the CEO of a large organisation from working for a competitor, but generally speaking, such restrictions won’t be upheld by a Court when an employer attempts to enforce these against a lower level employee. Having an onerous restraint of trade provision can also incentivise an employee to agitate a dispute against the employer at the end of the employment relationship with the goal of negotiating an agreement to set that clause aside. Ensuring that any restraint clause is reasonable goes a long way to avoiding problems with enforcement or employees disregarding those restrictions. - Failure to protect confidential information properly.
Many contracts restrict the use of confidential information after termination.
Many of those contracts don’t restrict the way employees deal with confidential information whilst employed.
The contract should be drafted after careful thought about the employee’s role and duties so that any confidential information clause addresses how the employee deals with confidential information during the employment.
An employment contract should be designed to protect the interests of the employer and spell out the rights of both the employer and the employee.
Beyond that, the contract must also be enforceable at law. Restrictions that are too broad or fail to take into account the particular circumstances of the employer, or the duties of the employee often fail to do what was intended – which is to prevent loss to the employer when an employee or former employee behaves unethically.
To talk about the contracts your business needs, please call us on (03) 5722 2481.
MORGAN COUZENS LEGAL
