Employment Contract

[royale]

A friend of mine has been asked to sign an employment contract with a few clauses that I dont believe are particularly fair (and possibly not legal), they read-

Intellectual Property: Any inventions that you may conceive at any time during your employment (whether within or outside normal working hours) shall be fully disclosed to the Employer and all rights to any such invention
shall be the sole property of the Employer.
I dont believe this is fair as the guy in question has a fair bit of his own lab stuff at home and does a little personal research not directly related to the stuff he does at work.

Employment Termination:For a period of 3 months after termination the Employee must not directly or indirectly contact, solicit, or in any way service the customers of XX company.
While I undestand a clause of this type is common, the guy is in a very small field of vet research which is a tiny industry- so this clause effectively stops him from contacting friends for 3 months (his social circle includes clients of the company) and would stop him from working in his field for 3 months.

Are these clauses legal and/or enforcable in their current wording?

[phunkachunka]

I would also like to know if you can have a 'living employment contract' as our company says it does. They say they are free to make changes to the contract whenever they please, yet never let us know of the changes.

Also, a couple of years ago they up and decided that their Help Desk staff no longer were required to be paid leave loading. Since we don't come under an award, they felt they paid us too much already and removed it. We didn't have to sign anything or agree to anything, they just took it away.

Is that legal?

[tomsyman]

Both clauses are common - he may want to talk to HR to get an added clause relating to the IP so that anything he thinks of outside of the normal cause of business for that firm is his.

the second clause relates to getting clients to move to another firm. If it is social contact shouldn't be a problem.

[jasebert]

All I have to say is UNION!!!!!!!

Unions are starting to come into the private sector and I would think that it would be the perfect opportunity to bring in a union and get them to discuss the issues.

The problem with Aust is that we just agree to it and the attitude 'She'll be right' just plays right into their hands.

I had similar clauses but they were never enforced. But it would be interesting to get a legal standpoint on these clauses.

[beerbaron]

Pity there isnt a strong Union for IT workers ...

[BtrFly]

the IP one is standard, cos if you do something on your employers time then rightly it is their property. However if it is outside work with company equipment it can also be enfored. If he paid for the equipment with his own money, then i think it is a different matter

also to the paid holiday thing- it is generally accounted for within your pay, unless specifically laid out. they are screwing us all...

[royale]

the IP one is standard, cos if you do something on your employers time then rightly it is their property. However if it is outside work with company equipment it can also be enfored.

I dont think there is any issues with an 'on company time policy' but the clause suggest at any time while under employment.

[dwarfthrower]

I think both those clauses are pretty wrong... but they are only as enforceably to the extent to which the company is willing to pursue them.

On the invention side of things, if he signs it, his employer then has a very good case for taking the rights to any invention he comes up with - company time or not. Of course, such things only affect those who are in the habit of going off and doing the same thing they do at work, at home for fun - computer programmers are a prime example.

Of the contact one, The employer is hardly likely to want to try and sue because he invited an old mate around for a barbecue... however if he tried to poach the same old workmate, they might.

I'd get him to talk to a lawyer.

[royale]

Dont look now....

[dwarfthrower]

OK... so you fail to see the difference between Royale asking a general question on the legalities of a few clauses in an internet forum, and Royale's friend actually seeking proper legal advice on the contract as a whole. That's fine... but they are two separate things and not in the slightest bit mutually exclusive.

Perhaps when one of the lawyers that dispenses advice in this "lawyer forum" you mention turns up and answers Royale's original question, they can explain to my why what I said was so bad.

[Girl.]

Ok, a really quick overview of the law according to my employment law textbook :)

In any employment law contract, it is implied (ie, even if there are no express provisions setting out the following, they still exist in any contract of employment) that:

1. The employee has an obligation to serve their employer 'faithfully'. One effect of this duty of fidelity is to prevent an employee operating a business which competes with their employer: Daily Cleaning Service v Pavlovic (1992) 34 AILR. An employee can plan to run a business in the future and might even commence preparations for their future employment while still employed by their employer, but they cannot do anything to undermine their employer until after the employment relationship has come to an end. It is unlawful to solicit the employer's clients to switch to the new business: Wessex Dairies Ltd v Smith [1935] 2 KB 80. It is also unlawful to recruit staff who are presently working for the same employer or to remove, copy or memorise any of the employer's valuable information.

Contractual clauses restraining trade are unlawful and unenforceable. An employer cannot use restraints just to stifle competition after the employee has left his/her employment -- this is known as the doctrine of restraint of trade and prohibits interference with freedom of trade, including the right to sell one's personal labour. Provisions restraining trade are presumed to be unenforceable unless they can be shown to be reasonable in the interests of the parties and the public. However, it is established that employers can legitimately seek to protect their trade secrets and established customer connections, so they might be able to impose a post-employment restriction on an employee if the employee has had personal contact with the employer's customers. However, such a provision must be no wider than is reasonably necessary in order to protect the employer's interests, and if it is held to be too wide it may not be enforced (although legislation in NSW allows the courts to read down restraint of trade provisions which are too wide and enforce them to the extent that they are reasonable in some circumstances).

2. A term will also be implied that any invention created by the employee in the course of employment is held on trust for the employer, and any patent obtained must then be granted to the employer if the employer requests. If this happens, the employee has no automatic right to share in any profits made from the patent. However, if the employer wants to claim any patent he/she must show that making the invention clearly fell within the duties for which the employee had been hired: Spencer Industries Pty Ltd v Collins (2003) 58 IPR 425. However, the Courts have been reluctant to enforce contractual provisions like the one royale has described above on the basis that they are a restraint of trade and purport to assign ownership of inventions created outside the scope of the worker's employment to the employee.

In relation to copyright and registered design rights, the subject of the copyright etc ust arise from work done in the course of the employment. Even if your friend invents something in the course of his work, he has moral rights in the invention which allow him to insist on being recognised as the author of the work he has created and he can object to any 'derogatory treatment' of the work, such as mutilation or material alteration, although his employer can treat his inventions 'reasonably'.

I hope this makes sense and that you find it helpful... I look over Still Life's employment contracts whenever he gets a new job and I was disgusted at the number of provisions which would never be enforced in a court because they restrain trade. I guess that employers keep putting them in because employees don't know that the provisions can't be enforced and will rarely challenge them.

edit: Dwarfthrower was totally correct. Everything I've said above is very general and royale's friend should have a lawyer look over his contract because the law applies differently depending on the type of contract, the industry, circumstances of the case etc etc. It isn't meant to be legal advice, just some general information so he has a basic idea of what he may or may not be entitled to.

[Sagacious]

A friend of mine has been asked to sign an employment contract with a few clauses that I dont believe are particularly fair (and possibly not legal), they read-

Intellectual Property: Any inventions that you may conceive at any time during your employment (whether within or outside normal working hours) shall be fully disclosed to the Employer and all rights to any such invention shall be the sole property of the Employer.
I dont believe this is fair as the guy in question has a fair bit of his own lab stuff at home and does a little personal research not directly related to the stuff he does at work.


Difficult to enforce if no reporting of invention to employer and further unenforceable if not directly related to the scope of employment.

Employment Termination:For a period of 3 months after termination the Employee must not directly or indirectly contact, solicit, or in any way service the customers of XX company.
While I undestand a clause of this type is common, the guy is in a very small field of vet research which is a tiny industry- so this clause effectively stops him from contacting friends for 3 months (his social circle includes clients of the company) and would stop him from working in his field for 3 months.

Are these clauses legal and/or enforcable in their current wording?

restraint on trade is different from restraint on competition. Restraint on competition is unlawful. A restraint on trade is a right purchased (as for instace in a business purchase). See Cedar Hill Flowers & Foilage P/L & Anor v. Spierenburg & Ors [2002] QCA 348 (http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/qld/QCA/2002/348.html) and the cases cited therein.

Hope this is of assistance to your friend.

[dozer]

i sign contracts like this often, they are standard clauses that will have little relevance in the real world.

[geggle]

These clauses are quite common and usually not used.

The first is to ensure you don't take company IP, work on it yourself, then patent it (or otherwise make money from it) before the company does. It's written that way because it is impossible to enforce if courts have to somehow decide whether the invention was made "on company time" or not. If you think you have the possibility to create something of your own, then the usual method is to seek specific written permission from the company beforehand disclaiming ownership. Depending on what the company is, you might be able to get a blanket "dispensation" for a particular area.

The second is an anti-poaching clause, which are very rarely used, and as far as I know, almost never successful even if action is taken. You need to make this as small in scope as possible - from what you have written, specifying the company by name is pretty good - usually these give an entire industry.

[royale]

Thanks for all the input, but both my friend and I have seen and signed clauses of this nature before, my question relates specifically to the wording of the two clauses. The first is worded such that it covers activities & interests outside work, and the second could stop the employee from contacting friends and possibly from earning an income should he leave the company. My query is to the legality and enforceability of these specific clauses, not clauses of this nature

[dozer]

i think youre worrying a little too much

[katana]

Intelectual property can and has been fought in court, If they inventor comes up with an idea that in in line with the companies scope of works and he is getting paid to develop that sort of invention and he does it on company time then it becomes the property of the company.

If a person who for arguements sake is a petrol station attendant and invents a new lawnmower in his own time then the employer has no rights to his intelectual property.

In cases of IT related stuff it is a bit more clouded. Ie the guy who wrote the first e-mail program and came up with the @ symbol got nothing and is entitled to nothing because it was a program he wrote for fun while working for a defence contractor in IT.

Depending on who you work for there are also restrictions on what intelectual property that you own and can share. Ie the contract that I am currently employed under stipulates that any work I do the sole owner is the Dept I work in and sharing some of that info can put me in jail anywhere from 2 to 25 years and they have to power to do it.

Once you sign the contract you are agreeing to the terms and conditions of the contract and are beholden to it.

[dozer]

in theory yes, but id like to see a recent case thats gone through the courts

[Girl.]

I would also like to know if you can have a 'living employment contract' as our company says it does. They say they are free to make changes to the contract whenever they please, yet never let us know of the changes.

Also, a couple of years ago they up and decided that their Help Desk staff no longer were required to be paid leave loading. Since we don't come under an award, they felt they paid us too much already and removed it. We didn't have to sign anything or agree to anything, they just took it away.

Is that legal?

Sorry, I only just saw this -- it depends on whether you are under an employment contract, award, AWA etc. Unless your employer is a public sector authority which has stautory power to change employment conditions as it sees fit, it can't generally vary contractual rights and duties without you agreeing to the variations. However, if there is an express provision in your contract saying that the employer can vary the contract without notifying you, then this is valid and enforceable and your employer can change the terms of your employment contract.

Hope this helps :)

[Aurelius]

Regarding the clause that excludes someone from taking employment at a rival firm for x months after dismissal: since this is basically forcing someone to reject employment following dismissal in fields where he can legitimately work. In this scenario, a person would be liable to lose government benefits, and so would therefore be illegal.
A contract that requires a party to break the law is null.

[Sagacious]

Regarding the clause that excludes someone from taking employment at a rival firm for x months after dismissal: since this is basically forcing someone to reject employment following dismissal in fields where he can legitimately work. In this scenario, a person would be liable to lose government benefits, and so would therefore be illegal.
A contract that requires a party to break the law is null.

That's why when you take out a hit on someone the hitmen can't sue you if you fail to cough up. Mind you tehre are a lot worse things in life than getting sued.

[Uther Pendragon]

I had one of these non-compete style clauses in the contract for my current job, it rattled off a whole list of companies I wasn't allowed to seek employment with, all travel companies, and at the end had a blanket "And any other companies deemed to be of a competing nature by us", they wanted a 6 month block on seeking employment in travel companies even though I was only on for a 3 month contract.

total bullshit

I signed it anyway under the assumption that it was pretty much unenforceable.
The same company however is now talking tough about one of the former management staff who left the company to go to a competing travel company and took a couple of other managers with them, doubt they will do anything more than just piss and moan about it though.

[Aurelius]

Uther,
They can piss and moan. But it'd be hard to have enforced. And if it was enforced, and if this character had government entitlements affected, I can see legal brains in government departments (I used to work with some of them) getting the shits and taking their own action.
I don;t think what I said above has been tested in case-law, but can any of us see the newspaper headlines saying that the poor taxpayer has to pay someone because they can;t work because their former employer will cry? Ooooh, I would love to see that.