Webinar Series: Confidentiality and Restrictive Covenants Around the Globe Australia and Japan 7 March 2013 Dominique Hartfield Anna Elliott Sayaka Kasahara 37 Offices in 18 Countries
Today’s presenters Jane Bullen Partner and today’s moderator UK jane.bullen@squiresanders.com Dominique Hartfield Senior Associate Perth, Australia dominique.hartfield@squiresanders.com Anna Elliott Senior Associate Sydney, Australia anna.elliott@squiresanders.com Sayaka Kasahara Associate UK (Japan) sayaka.kasahara@squiresanders.com 2
Australia - overview • What are the key areas of the law in Australia? • What types of protection and restraints are available in Australia? • How do I make contractual terms stick? • What other legal options are available, such as the use of confidentiality clauses/agreements? • What practical steps and strategies can be implemented to protect your business? • What is the impact of social media? • What are the available remedies in Australia? 3
Australia – Key areas of the law • At common law, restrictive covenants in an employment context are prima facie void • However the courts will enforce a restraint so long as it is not wider than is reasonably necessary to protect an employer’s legitimate business interests • Recognised interests include: Protection of confidential information Protection of customer relationships Protection of stable workforce • Common types of restraint: Non-compete (i.e. cannot work in the industry) Non-solicit (e.g. customers) Non-poaching (e.g. employees) 4
Making contractual terms stick… • In assessing the reasonableness of a restraint the courts will consider the extent of the activities being restrained, the geographic area and the time period during which the restraint operates • Other assessing factors taken into account arise from the circumstances at the time the contract was entered into, the nature of the business and clientele, the employee’s position and relationship with customers, and any amounts paid for the restraint • Limiting the scope of the restrictions will maximise chances of enforceability • Use of cascading restraints by employers • Use of a restraint payment clause 5
Australia - key areas of law • Notice of termination – the use of extended notice periods in employment agreements • Garden leave – the use of garden leave provisions to protect the employer while the employee is still employed • Liability of employers for inducing a breach of contract 6 6
Australia – case examples • Pearson v HRX Holdings Pty Ltd [2012] FCAFC 111 • Full Court of Federal Court upheld a 2 year ‘no - competition’ and ‘no - interest’ restraint • Employee had received a restraint payment and the period reasonably accommodated the contractual cycle on which the company operated • Seven Network (Operations) Ltd 7 ors v James Warburton (No 2) [2011] NSWSC 386 • Supreme Court of NSW found a non-compete restraint clause contained in a management equity participation deed was valid and granted an injunction restraining the employee for a 10-month period within Australia. 7
Australia – other legal options • New South Wales - employers have the benefit of the Restraints of Trade Act 1976 (NSW) Stacks Taree v Marshall [2010] NSWSC 34 • Statutory duties - the Corporations Act 2001 (Cth) imposes a number of duties on directors, officers and (in some cases) employees, including: s181 - duty to act in good faith s182 - must not improperly use position s183 - must not use information to cause detriment or gain advantage • Fiduciary duties and implied terms 8
Australia – other legal options • Law of confidential information – based on: Contract - express contractual provision Equity – equitable doctrine of confidence • Intellectual property: ownership by agreement if in the course of employment, employer owns (no “default” rule for patents) • Remuneration strategies: discretionary payments deferred payments retention bonuses other options 9
Australia – practical steps and strategies So an employee has resigned. What do we do? Step One Consider options for notice period Step Two Remind employee of restraints and obligations Step Three Conduct surveillance and monitor breaches Step Four Consider remedies in the event of breach 10
Australia – evidence gathering • IT investigations Impact of Workplace Surveillance Act 2005 (NSW), S urveillance Devices Act 1988 (WA) In-house investigations vs forensic IT expert Sources of information include • Work emails (including backups for deleted emails) • Internet access • Deleted files • Link files • Windows registry records for USB key/portable hard drive use • Other sources • Work mobile telephone records • An informant: persuading a departing employee to stay • Clients • Evidence gathering • Impact of social media 11
Australia – available remedies • Remedies in the event of breach: Undertakings Interlocutory injunctions to enforce restraints (must be timely) Preliminary discovery Anton Piller order Breach of contract Breach of fiduciary duties and other equitable claims Damages / account of profits (review loss and damage) 12
Australia – summary of practical tips • Restraints (‘enforceable ones’) – identify the legitimate interest to be protected • Gardening leave and notice provisions • Confidential information and intellectual property • Strong breach letters and undertakings • Gather evidence and investigate • Take any necessary legal action 13
Japan – Overview • What types of protection and restraints are available for the employer in Japan (during and after employment)? • Post-employment restrictive covenants – are they enforceable? What business interests can a company protect? For how long can a company restrict an ex-employee from competing? Is compensation a necessary element? • Remedies – what can you do if an ex-employee breaches the restrictive covenants? • Making your contract terms stick • What is the impact of social media? 14
Japan – Importance and scope How is an employee’s ability to compete restricted? During employment: Fiduciary duties/duty of fidelity – Directors: fiduciary duties/ duty of fidelity -> Express prohibitions to compete under the Companies Act – Employees: duty of fidelity -> Implied contractual terms preventing the employee from competing – the Labour Contract Act Express contractual terms Post-employment: No fiduciary duties/duty of fidelity Need express agreement with the employee not to compete (“ post- termination restrictive covenants ”) – by way of contract, work rules, declaration, etc. Other restrictions (during and post-employment): Act of tort The Unfair Competition Prevention Act (in relation to trade secrets) 15
Japan – Types of restraints available Types of restraints: Non-compete Non-solicit Non-deal Non-poaching Prohibiting the use of confidential information 16
Japan – Enforceability: overview Restrictive Covenants Freedom of Occupation -constitutional right of an -legitimate business interest ex-employee of the employer Limitation on what can be agreed Key considerations paid by the courts when deciding the enforceability: 1. Is there a clear agreement with the employer and the ex-employee as to the scope of the restrictions? 2. Is there a legitimate business interest of the employer to protect? 3. What was the position/role of the ex-employee while in employment? 4. What acts of competition are restricted? For how long? Geographical area of the restrictions? 5. Is there compensation paid to the ex-employee? 6. Public interest? 7. Other circumstances specific to the case? 17
Japan – Enforceability: closer look What do they mean? 1. Clear Agreement. Have you clearly agreed with the ex-employee the terms of the restrictions, e.g., what acts are prohibited, for what competitors the ex-employee is prohibited to work, for how long, etc.? If not, the courts will render the restrictive covenants void. 2. Legitimate interest of the employer. What interests of the employer can be protected? Trade secrets (will be given high level of protection) and other confidential information (what confidential information will be protected?). Trade connections with customers. Maintaining the stability of the workforce. 18
Japan – Enforceability: closer look 3. Position of the ex-employee while in employment. Was the ex-employee in a position to access the important information of the company? Is it reasonably necessary to impose restrictions on an ex- employee in that position for protection of the company’s interests? 4. The actual activities restricted, the duration of the restrictions, and the geographical area of the restrictions. These must be reasonable and adequate in order necessary to protect the business interest of the employer. No established limit of time which the courts consider reasonable/adequate – it depends on what is considered reasonable under the circumstances of each case. 19
Recommend
More recommend
