Melbourne, 4 December 2012: The legal issues and risks that are unique to the employment of executives are the subject of a newly released Clayton Utz publication, Executive Employment Contracts ─ Compliance and Risk Issues: Guidance for Boards and Senior Executives in Australia.
Produced by Clayton Utz's national Workplace Relations and Safety team, the publication provides practical tips and guidance for employers and executive employees on their mutual obligations and the unique legal considerations that apply to the employment relationship ─ particularly if the relationship breaks down.
"This is an increasingly complex and potentially fraught area of the law, particularly in the private sector," said Clayton Utz Workplace Relations and Safety partner Glen Bartlett. "It is also worth noting that the definition of an "executive" employee is broader than individuals at CEO level and can include any individual who performs managerial functions, including a junior manager. That means the legal considerations involved are also broad in scope and need to be carefully considered when engaging executives, whether in the private or public sector."
Glen said the executive employment relationship commonly gave rise to legal issues such as the applicability of a restraint of trade clause in the employment contract, the potential liability for misleading representations and statements, and the use or misuse of confidential information or intellectual property.
"Enforcing a restraint of trade clause, for example, is notoriously difficult unless it can be shown that the restraint is reasonable in the circumstances. What is reasonable will depend on the facts and how carefully the clause is drafted and it is imperative the restraint goes no further than is necessary to reasonably protect the interests of the employer," said Glen.
Termination of the executive employment relationship also involves unique considerations and requires great care on the part of both the executive and the employer.
"For example, in the case of a publicly listed company, it may be necessary to disclose to the market the fact that the employment relationship has come to an end," Glen said. This involves practical considerations such as how best to preserve the respective reputations of the employer and senior executive, and the need for an appropriate communications strategy that sets out how, when and what is communicated, both internally and externally.
"The potential complexity of the legal issues that can arise highlights the need for employers and executives to clearly understand their obligations and obtain early strategic advice at the outset of the relationship," Glen said.