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Focus: Employment & Safety

8 May 2017

In this issue: we look at how post-employment restraints can be unenforceable if a company does not comply with the employment contract itself; a decision of the Federal Court that confirms an employee who is on long-term sick leave must continue to have regular contact with their employer; and a successful appeal against a Fair Work Commission decision because the Commission did not consider whether an employer should have had legal representation.

Employer's contract repudiation nullifies post-employment restraint

In brief: A company repudiated an employee's employment contract by not following its own bonus assessment scheme, meaning the employee's post-employment restrictions could not be enforced. Senior Associate Tristan Garcia and Law Graduate Rhiannon Zanetic report. 

 
 

How does it affect you?

  • Failure to comply with a company procedure that forms part of an employment contract is a breach of contract. Sufficiently serious breaches of contract are a repudiation of the contract.
  • If the employee 'accepts' the repudiation and brings the contract to an end, any post-employment restraints in the contract may become unenforceable.

Background

Mr Loone was employed by Crowe Horwath Australia (CHA) as Managing Principal in 2012. After Mr Loone resigned in 2016, CHA sought to enforce a post-employment restraint clause in his employment contract that prevented him for a period of 12 months from:

  • soliciting clients with whom he had 'direct dealings' in the last 12 months of his employment; and
  • engaging in any business the same as, or in competition with, CHA's business within a defined geographical area.

However, Mr Loone argued that CHA had repudiated his contract by failing to follow its bonus assessment scheme. He said that his resignation constituted his acceptance of that repudiation and that, as a consequence, the restraint was unenforceable.

The bonus scheme required CHA to consider Mr Loone's 'personal performance' in determining the amount of any bonus payable to him. Mr Loone alleged that CHA failed to take into account the profit arising from one of his substantial acquisitions in making that assessment.

Decision

Was the restraint clause enforceable?

The Victorian Supreme Court decided that if the repudiation had not occurred, the restraint clause would have been enforceable. This was because the clause did no more than what was necessary to protect CHA's legitimate interests. In particular, the clause was necessary to protect CHA's client base. Mr Loone was a longstanding senior employee with close relationships with many clients. The court would have enforced the restraint for the full 12-month period, since CHA would require at least 12 months to consolidate its relationship with those clients.

Repudiation

Notwithstanding that the post-employment restraint would have been enforceable against Mr Loone, the court decided that Mr Loone was not bound by it. The court accepted Mr Loone's argument that his employment contract had been repudiated by CHA, his decision to resign from his employment constituted his acceptance of that repudiation, and that this meant the restraints were unenforceable.

The court was satisfied that Mr Loone had expressed concerns about his remuneration (including the bonus) at the time that he resigned. CHA argued that Mr Loone's resignation could not have been connected to the discussion about his remuneration, given that there was a delay of 11 days between the two events. However, the court found that Mr Loone had made clear his objection to CHA's conduct and his reasons for leaving on more than one occasion and had resigned without unreasonable delay.

Unreasonable for ill and injured employees to use self-imposed ignorance as a sword

In brief: A recent decision of the Federal Circuit Court confirms that employees on extended periods of sick leave have a duty to keep in regular contact with their employer. Associate Laura Miller reports.

 
 

How does it affect you?

  • If ill or injured employees stop answering correspondence from the employer during their sick leave, the employer may be able to rely on the employee's failure to respond to take disciplinary action against the employee.

Background

Mr Laviano, an employee of the Fair Work Ombudsman (FWO), was absent from work for significant periods between March and December 2014 due to depression and anxiety. He claimed this was work-related.

Between June and November 2014, the FWO directed Mr Laviano to attend six medical examinations, so that it could understand Mr Laviano's medical condition and facilitate his return to work. However, Mr Laviano failed to attend all but one of these appointments, including an appointment scheduled for 27 November 2014. Around September 2014, Mr Laviano also stopped directly communicating with the FWO, directed his treating doctors not to speak to his employer and also revoked the FWO's authority to communicate with his doctors.

In January 2015, the FWO terminated Mr Laviano's employment due to his failure to attend the medical examination on 27 November 2014 and his failure to communicate with it for a number of months.

Mr Laviano lodged a general protections claim, alleging that his dismissal was because he suffered a disability and because he exercised his workplace right to take sick leave.

Mr Laviano claimed that his disability meant that between October and December 2014 he was not fit for work. He said that his doctors advised him that he should not open mail from the employer and should not contact his employer. This was intended to give him time to focus on his psychotherapy treatment. However, Mr Laviano failed to inform the FWO about this medical advice until 15 December 2014.

Mr Laviano claimed that his failure to attend the medical examination scheduled for 27 November 2014 was because, on medical advice, he had not opened correspondence from the FWO informing him of the appointment.

Decision

The court did not accept that Mr Laviano had been dismissed because he exercised a workplace right or because of a disability.

While the court accepted that Mr Laviano suffered a psychological illness that rendered him unfit for work, it did not accept that his disability prevented him from attending medical assessments or communicating with his employer. It also found that Mr Laviano was aware of his appointment on 27 November, but simply chose not to attend.

The court noted that Mr Laviano had simply chosen not to communicate with his employer on some occasions, and on others did not communicate with his employer based on medical advice. Significantly, the court noted that it was unreasonable for Mr Laviano to have shut down all communication with his employer. It found that Mr Laviano had an implied duty to communicate with his employer and, as a result, should have taken steps to inform the FWO that he would not be communicating with it on medical grounds.

Fair Work Commission must give proper consideration to legal representation

In brief: An unrepresented applicant has successfully appealed a Fair Work Commission decision refusing her an extension of time to file her unlawful termination claim because the Commission did not consider whether the employer should be represented. Senior Associate John Naughton reports.

 
 

How does it affect you?

  • The Fair Work Commission must give leave for an employer to be represented by a legal representative who is not an employee of the employer or an employer organisation.
  • The Fair Work Commission should consider each party's arguments about legal representation, even if its leave is not required.

Background

Ms Wanninayake was dismissed from her employment with the Queensland Government's Department of Natural Resources and Mines (the Department) in about November 2013. She subsequently pursued various proceedings in both the Queensland Industrial Relations Commission and the Industrial Court of Queensland in relation to her employment and dismissal, but each of these were substantially unsuccessful.

Ms Wanninayake then filed an unlawful termination dispute with respect to the termination of her employment with the Fair Work Commission (FWC). She contended that she should be granted an extension of time to pursue her claim that her employment had been terminated because of an illness or injury in breach of the Fair Work Act 2009 (Cth).

Initial decision by the Fair Work Commission

Initially, the FWC rejected Ms Wanninayake's application, determining that there were no exceptional circumstances that would justify the FWC exercising its discretion to extend time. On that basis, the FWC made orders in January 2017 refusing Ms Wanninayake's application for a further period in which to pursue her unlawful dismissal application.

Ms Wanninayake appealed this decision to a Full Bench of the FWC.

The decision on appeal

At the heart of the appeal was the question of whether the FWC should grant an extension of time to make the unlawful termination application. The Full Bench granted Ms Wanninayake's appeal.

In its reasons, the Full Bench noted that the Department had legal representation (Ms Willoughby), which Ms Wanninayake opposed. The Full Bench accepted that Ms Willoughby was an employee of the State of Queensland (the 'owner' of the Department) and that she did not require permission to appear on behalf of the respondent.

Despite this, the Full Bench considered that the FWC's initial decision was not made according to law, because of the failure by the Commissioner to expressly deal with Ms Wanninayake's opposition to the Department's legal representation. The case was remitted to a single commissioner to re-decide.

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