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Employment Contract - It may outlast the relationship |
Termination of the employment relationship may not necessarily end an employment contract. |
Although a wrongful dismissal or wrongful act by an employee can destroy an employment relationship, the employment contract remains in force until the employee, or employer, accepts the breach and ends the contract. However, to benefit from the contract remaining, the wronged party has to remain ready, willing and able to perform their contractual obligations. |
In a recent case a broker on a fixed-term employment contract breached the contract by resigning and going to work for a competitor. The company did not accept his resignation and obtained a court order stopping him from working for the competitor. It directed him to take leave. At the end of this it directed him to return to work, and when he disobeyed and returned to work for the competitor, the company terminated the employment contract. |
The court held that the employee's failure to return to work was a fresh breach of the employment contract. The employer was thereafter entitled to terminate the contract and invoke a clause where compensation is paid by either the employee or employer breaking the agreement. Since brokers were expected to make amounts twice the size of their salary, the damages claimed by the employer were seen as a genuine estimate of loss. The court ordered the employee to pay over $500,000. |
Contact Peter McNamara for further information: peter.mcnamara@cml.com.au
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