Chapter 4 Human Resource Management and the Law

Learning Objectives
• Understand the importance of the law as it relates to HRM
• Identify the sources of legal obligations in employment law
• Understand the importance of the contract of employment and its essential terms
• Identify the legal requirements at various stages of employee recruitment and selection
• Discuss the procedures for terminating employees
• Understand the employee’s rights of review upon dismissal

Chapter Outline
Chapter 4 of the text is divided into five sections, each of which is designed to provide a
valuable introduction to employment law and issues that are particularly important for the role
of the HR Manager. The first two sections examine the legal obligations of employers and
employees that interact to form law of employment. The role of the law in HR activities such
as recruitment and selection is then examined in section two. The remaining sections examine
the issues associate with terminating employees, the procedure employers should follow, and
the rights of employees in these circumstances.

HRM and the law

HR specialists manage people within the employer-employee relationship. The law of the land
governs the boundaries of that relationship, so it is essential for HR managers to have a basic
understanding of these laws. Employers have obligations to their employees and, in turn,
employees owe certain duties to their employers.

Sources of legal obligations

There are several sources of legal obligations that interact to form the law of employment.

Contracts - An employment contract will exist between the employer and employee in most
situations of employment. It can be either: (a) formal: a written document signed by both
parties, (b) informal: an oral agreement (usually courts will infer the existence of a contract
from when work commences)

Contracts should include terms such as remuneration, hours of work, notice periods,
redundancy payments and restraints of trade.

Statutes - State and territory governments have legislated to prescribe minimum conditions of
employment that apply despite any express provision in the contract.

Statutory Agreements - The shift away from centralised bargaining has been facilitated by the
introduction of Australian Workplace Agreements (AWAs) and provisions for non-unionised
certified agreements.

Awards - In the past, awards were the primary source of employment obligations for most
Australian employees and employers. Awards are now limited to dealing matters that relate to
minimum conditions only. Awards specify minimum terms and conditions of employment, are
created by state and federal industrial tribunals and are legally binding on the parties to them.

Common Law - The common law is 'case law' which has developed in the Court system. The
body of previous judgements guides how we should interpret the other sources of legal
obligations. Thus, the general duties of the parties to an employment relationship are
prescribed by the common law.

Employee recruitment and selection

Several laws govern the arrangements for employing people. The following areas require
particular consideration in the pre-employment phase:
• the job advertisement
• the job description
• the application form
• the interview

Discrimination - Employers must not discriminate against employees on the basis of race,
colour, sex, sexual preference, age, physical or mental disability, marital status, family
responsibility, pregnancy, religion, political opinion, national extraction or social origin, in
areas such as hiring, remuneration, promotion and termination.

Discrimination involves making a distinction between individuals or groups so as to

disadvantage some and advantage others. It can be direct or indirect. Direct discrimination is
the most obvious form, and occurs where a person or group is treated less favourably than
another person or group would be treated in similar circumstances. Indirect discrimination
involves practices that appear to be inoffensive but that result in a person or group being
disadvantaged.

The job advertisement

HR managers must be careful when publicising a job vacancy that the advertisement does not
indicate, or could not reasonably be understood to indicate, an intention to act in a manner
that is discriminatory under any of the legislation. Two groups of people are caught --the
employer who causes the advertisement to be published, and the publisher. Both can be fined if
deemed to have been discriminatory.

The job description

To avoid later accusations of discrimination, or complaints that an employee's duties are not
part of their role, it is important to prepare a concise job description. This job description
should generally be made available at the interview. They should always consider the
employer's present and future expectations of the employee performing the particular job being
described.

Application forms
When preparing application forms, HR managers should bear in mind that certain questions
may not be asked. The following areas should be given consideration and avoided if not
directly relevant to the job: Age, Marital status/family life, Physical and mental capacity,
Criminal convictions, References and previous employment.
The interview
An interviewer should not conduct an employment interview without careful planning and
forethought. Failure to be aware of discrimination legislation in particular could lead to court
and tribunal intervention. A prudent HR manager should conduct the interview with another
person from the organisation. In all cases, comprehensive notes.

Occupational Health and Safety Requirements

All state governments and the federal government have introduced legislation obliging
employers to be responsible for occupational health and safety. Employees should not be
exposed to unacceptable levels of hazard at work, and those who are injured at work should
be fairly and sufficiently compensated. Basically, an employer must provide and maintain, so
far as is practical, a working environment that is safe and without risks to the employee's
health. When hiring employees, HR managers must provide all the necessary information,
instruction, training and supervision for employees to perform their work.

Terminating employees
Types of Dismissals
Dismissals invariably fall into one of three broad categories:

1. Dismissal based on an employee's serious breach of the contract demonstrating an

intention not to be bound by its terms - this is known as 'summary dismissal'.
2. Dismissal pursuant to the express or implied terms of the employment contract whereby an
employer is entitled to terminate the contract by providing reasonable notice or payment in
lieu.
3. Dismissal based on the employer's commercial or economic decisions regarding the
management of the business - this is called 'redundancy' or 'retrenchment'.

Sometimes, an employee may resign from a position and refuse to accept an alternative
position, yet the employee is treated as if they had been dismissed. This is known as
'constructive dismissal'.

Procedures for termination

The unlawful termination jurisdiction applies to 'employees' in general. Employers must
comply with the provisions for terminating employment and provide employees with an
opportunity to defend themselves against allegations related to conduct or performance.
Otherwise, a termination may be deemed to be harsh, unjust or unreasonable based on a
finding of a lack of procedural fairness.

• Summary dismissal - The right to terminate summarily (that is, without notice) is a
powerful tool and is restricted the right to occasions when employee conduct or intended
conduct is in direct and serious opposition to the employee's obligations. Most awards and
industrial agreements preserve the employer's right to terminate without notice in response
to behaviour such as misconduct, dishonesty, neglect and insubordination.
• Notice of dismissal - Employers may not terminate employment unless they have given
the employee sufficient notice. Otherwise, compensation must be paid. The worker should
be notified in writing of the decision to terminate employment and is entitled to receive a
statement of reasons for the termination.
• Unlawful termination for proscribed reasons - Employers are prohibited from
terminating an employee's employment for reasons of race, colour, sex, marital status,
family responsibilities, pregnancy, religion, political opinion, national extraction and social
origin, sexual preference, age, physical or mental disability, refusal to negotiate, make,
sign, extend, vary or terminate an AWA. In addition, an employer is prohibited from
terminating an employee's employment because of temporary absence from work due to
illness or injury, union membership or participation in union activities.

Rights of the employee

A dismissed employee has various means of appeal.

Wrongful dismissal - An employee may make a wrongful dismissal claim when an employer
makes a fundamental breach of the employment contract. For example, termination on
insufficient notice, constitutes a wrongful dismissal.

Unfair dismissal - A dismissal may not be 'wrongful' but is nevertheless 'unfair'. This would be
the case where the employer gives full lawful notice or pays in lieu, but there is no misconduct
that warrants the dismissal.

Employer's right to 'hire and fire'

It is the basic right of management to choose employees and to dismiss or retain them. The
focus of termination of employment proceedings is to ensure that the parties receive 'a fair go
all round'. In considering a reinstatement order, the Commission and/or court will look to
factors such as the effect of the order on the viability of the employer's business, the length of
the employee's service with the employer and the efforts of the employee to mitigate their loss.

Giving reasons
Management is obliged to give reasons for dismissing an employee, especially if an employee
has good qualifications, long service and a good record, and there is nothing to damage their
character. It is also wise to give the employee an opportunity to explain their behaviour.

Failure to give warning

Failure to give employees sufficient warning of dismissal and the reasons for it may result in
compensation being paid.

Inadequate performance or misconduct warning dismissal

The Commission and/or court must ensure that the employer's investigations of the employee
are thorough and fair and that questions directed at the employee are made clear.
Remedies for unfair dismissal
Under new changes to the federal act, employees will be able to seek redress for unfair
dismissal in the Australian Industrial Relations Commission. If an employer unfairly or
unlawfully terminates someone's employment, the employer may face a claim for
compensation and/or reinstatement. If settlement cannot be achieved, the Commission may
make orders for the employee to be returned to the same position as if the employment had
not been terminated. Commission orders may include:

• declaring the termination to have contravened the provisions of the act

• requiring the employer to reinstate the employee
• ordering compensation

Retrenchment
Retrenchments are dismissals that are based on commercial and economic considerations. The
dismissals may arise for a number of reasons, including technological change, a downturn or
seasonality in business, and restructuring of the enterprise. In all cases, the employee is
dismissed through no fault of their own.

Summary
The law governs the parameters of all employment relationships. Legal obligations arise from
employment contracts, statutes, awards and the common law. Ignorance of the law is no
excuse, so HR managers need to be aware of these legal obligations.

Many problems can be avoided by carefully drafting a detailed employment contract. This
allows the parties to set out their particular intentions very clearly. It also forces the employer
and the employee to contemplate potential conflicts before they arise. This ultimately saves
time and money.
In dismissing employees, managers need to be aware of the required procedures and the need
to give reasonable notice. A workplace that is free of conflict is not only a happier one, but
also one that has an advantage over its competitors.

Terms to identify
common law redundancy
discrimination retrenchment
employee obligations statutes
employer obligations summary dismissal
employment contract unfair dismissal
reasonable notice wrongful dismissal
REVIEW QUESTIONS

Questions in bold print are recommended as exam questions

1. What are the five sources of legal obligations in employment law?

There are several sources of legal obligations which interact to form the law of employment.
These are contract, statute, awards and the common law.

Contract
In most situations of employment a contract will exist between the employer and employee.
This can be either:
(1) formal: a written document signed by both parties; or
(2) informal: an oral agreement. The commencement of work usually means that the court
will infer the existence of a contract.

Statutes
State and Territory governments have legislated to prescribe minimum conditions of
employment which apply notwithstanding any express provision in the contract. The
Commonwealth has legislated to protect equal opportunity. The relevant Commonwealth Acts
are the Sex Discrimination Act 1983, Racial Discrimination Act 1975, Affirmative Action
(Equal Employment Opportunity for Women) Act 1986 and the Human Rights Commission
Act 1981, Industrial Relations Reform Act, 1993.

Statutory agreements
The shift away from centralised bargaining has been facilitated by the introduction of
Australian Workplace Agreements (AWAs) and provisions for non-unionised certified
agreements.

• Certified Agreements - Certified agreements provide for collective enterprise bargaining.

These agreements are made between an employer and a group of employees, or an
employer and a union.
• Australian Workplace Agreements - AWAs are individual agreements made between an
employer and employee. They must incorporate certain minimum conditions, such as a
discrimination clause and a dispute resolution clause. AWAs can continue to operate for a
maximum of three years.

Awards
The primary source of employment obligations for most Australian employees is found in
awards. Awards are created by Federal and State Industrial Tribunals. They specify minimum
terms and conditions of employment. This explains why human resource managers need to be
aware of all awards relevant to their organisation.

Award conditions include minimum pay, hours of work, types of leave and the regulation of
the termination of employment. An employer may provide more favourable terms than those
provided by the relevant award.

The Common Law

The common law is "case law" which has developed in the court system. It is the body of
previous decisions by Judges which give guidance as to how we should interpret the other
services of legal obligations. The common law is also a separate source of legal duties and
obligations itself. Thus, the general duties of the parties to an employment relationship are
prescribed by the common law.

2. What are the five essential terms of an employment contract?

Any five from the following will do:
Duties, supervision, hours, work location, promotion policy and procedures, confidential
information, leave, salary/wages, benefits, overtime, discipline policy and procedures, bonuses,
superannuation.

3. What are three statutes which affect working relationships?

Some of the relevant Acts are listed on page 96 of the text.

4. What are two common law duties of employers?

General Duties of Parties to an Employment Relationship

Employer's Duties and Obligations Employee's Duties and Obligations to

to Employees Employers
1. To pay employees wages and 1. A duty to work in a skilful and competent
reasonable expenses incurred in the manner.
course of the employment.

2. To provide work in the 2. A duty to obey the employer's lawful

circumstances where payment is demands.
directly tied to performance.

3. To take reasonable care for the
health and safety of the employees.
4. To indemnify an employee for
losses incurred by the employer while
performing duties under the Contract
of Employment.
3. A duty to provide faithful service, which
includes a prohibition on disclosing
confidential information, a duty to account for
and protect the employer's property and a duty
to give complete attention to performing the
work. Further, the benefit of discoveries or
inventions developed by employees during the
course of their employment must be given to
the employer. This should be explained to the
person at the interview stage.

5. What is the difference between direct discrimination and indirect discrimination?

Discrimination involves making a distinction between individuals or groups so as to

disadvantage some and advantage others. It may be either direct or indirect. Direct
discrimination is the most obvious form and occurs where a person or group is treated less
favourably than another person or group would be treated in similar circumstances. Indirect
discrimination involves practices which appear on their face to be inoffensive but result in a
person or group being disadvantaged.

Table 4.1: Direct Discrimination v. Indirect Discrimination

DEFINITION EXAMPLE REMEDY

 Direct Treatment of a person An employer Damages – pecuniary
Discrimination or group less dismisses a female loss, hurt and
favourably than purely on the basis of humiliation
another person or her gender
group in similar
circumstances
Indirect A practice which A company makes Damages
Discrimination appears inoffensive promotion dependent
but which produces a upon 5 years
result in which a continuous services.
person or group is This disadvantages
disadvantaged women who often
take time off to have
children

6. What should HR managers avoid in interviews and on application forms?

* Application Forms
In framing the terms of an application form, it is necessary for HR Managers and other
interviewers to be aware that certain questions may not be asked either during an interview or
an application form. The following areas should be given consideration:

* Age
This clearly is one of the first questions on any application form. Although at present, age
discrimination is not prohibited in all jurisdictions, recent developments suggest that before
long questions concerning a person's age may be outlawed nationwide. When this occurs, the
only allowable question will be as to whether the prospective employee is under 16 years of
age (so they have the right to be employed).

* Marital status/Family life

Commonwealth Anti-Discrimination Legislation makes it quite clear that questions concerning
marital status should not be asked. Once such a question has been asked, it leaves the
employer open to the allegation that the failure to employ the applicant was motivated by
discriminatory considerations. The only real relevance of such questions may be to trace a
person's employment history. Thus the question that could be asked is whether or not that
person has been employed under another name. Similarly, it is extremely ill-advised for
questions to be asked about an applicant's family responsibilities. Such questions are only
relevant to an applicant's willingness to relocate, work overtime or travel. The appropriate
question would therefore be phrased in terms of the applicant's ability to meet such
commitments.

* Physical and mental capacity

Questions directed to physical and mental capacity are proscribed by most State legislation
unless it can be demonstrated that a particular physical or mental attribute is required. If these
questions are necessary, they should be carefully worded, to avoid the possibility of offending
the legislation (and the person going for the job!). The wording should be such as to tie the
question to the applicant's ability to perform the duties required by the job. For example, "can
you work under certain conditions, for example wet or humid environments?" or "can you
distinguish between different colours and accurately identify whether a particular electric wire
is, for example, red or green?"

If it is the case that the selection criteria for the job include the ability to perform tasks which
clearly require certain physical attributes, the applicant may be required to undergo a medical
examination or produce a recent medical certificate. The physical requirements should be
described when advertising the job.
* The Interview
During the employment interview an interviewer should not conduct the interview on an
unthinking basis. The failure by the interviewer to be aware of discrimination legislation in
particular, could well lead to court and tribunal intervention. It is important that the interview
and the process surrounding it should involve objectivity. As mentioned previously, a job
description is invaluable.

Consideration should always be given as to whether the interview should be conducted on a

one to one basis. Apart from affording the organisation the benefit of two opinions about the
potential employee, the presence of a second interviewer may represent an important back-up
in the case of an accusation of discrimination. Therefore a prudent HR manager should avoid
conducting one to one interviews. Conduct the interview with another person from the
organisation. In all cases, comprehensive notes should be made of the interview so that there
is a contemporaneous record available in the event of any challenge. Where there is only one
interviewer this becomes more difficult. A useful approach is to have a printed sheet with gaps
on it for comments related to each selection criterion.

After the completion of the interview or the process of culling written applications,
unsuccessful applicants should have their forms either destroyed or returned to them on
request. The applicant should usually be consulted before enquiries are made of other bodies
such as speaking to the person's previous employer or checking qualifications with academic
and professional institutions.

Avoid asking questions that are mentioned above in relation to application forms. It is just as
illegal to ask these questions at the interview as it is to ask them on the application form.

7. What is the usual notice period when dismissing employees?

Contracts of employment usually provide, expressly or implicitly, that they may be terminated
by a period of notice given by either side. The concept of dismissal on notice involves no
more than the employer giving the employee advance notice of intention to terminate the
contract of employment. When no period of notice is specified, it is established that contracts
of employment may be terminated upon reasonable notice being given by either party. The
major difficulty which arises relates to the definition of "reasonable notice".

Relevant Factors in determining what is ‘reasonable notice’ are:

length of service age professional standing

salary seniority pension rights
Industry Practice job mobility
experience qualification

Guidelines have been developed by the courts as to the length of notice required to constitute
"reasonable notice". However as reasonableness is a factual standard it will, in any one case,
depend upon the particular facts. It is wrong to think that the period of notice directly relates
to the pay period.

The significance of "reasonable notice" is that it provides the employee with a right to sue for
breach of contract if given no notice or given less than reasonable notice. It is important for
human resource managers to realise that even where the contract expressly stipulates a period
of notice, it is not necessarily conclusive and may be reassessed by the court or industrial
tribunal where the express term itself is unreasonable. In the case of industrial awards, which
only prescribe minimum conditions, Courts and industrial tribunals quite commonly find that a
longer period of notice existed. This is more likely to be the case in the context of senior
executives than blue collar or clerical workers.

In practice, it has become customary for employees to be paid in lieu of notice. This involves
the payment of the basic wage that the employee would have received had he or she worked
through the notice period. The acceptance of such a payment by the employee constitutes a
valid termination.

8. What is the difference between unfair dismissal and wrongful dismissal?

Wrongful Dismissal
Where an employer makes a fundamental breach of the contract of employment an employee
may make a wrongful dismissal claim. For example, termination on insufficient notice may be
a wrongful dismissal. The remedy usually available to a dismissed employee is damages for
wages lost as a result of a short dismissal period. An employee has a duty to mitigate their loss
and thus attempt to arrange alternative employment. If a new job is secured which provides
equal or better remuneration, then no damages will be awarded.

Unfair Dismissal
It may well be that a dismissal which is not "wrongful" is nevertheless "unfair". This would be
the case where the employer gives full lawful notice or pay in lieu, but there is no misconduct
warranting the sacking.

TRIGGER ACTION REMEDY

Wrongful Fundamental breach of Common Law Damages
employment contract Also injunctions, specific
by employer performance and
declarations
Unfair Dismissal was harsh, Statute Re-instatement, re-
unjust or unreasonable employment also
compensation

The availability, jurisdiction and remedies for an action for unfair dismissal vary from state to
state depending on the legislation enacted by Parliament. Thus, the factors considered by
tribunals in determining a claim will differ from state to state. But the following factors will
usually be considered. Human resource managers should be aware of these factors so as to
avoid claims for unfair dismissal.

9. What are some of the circumstances which a tribunal will consider in an unfair
dismissal claim by an employee?

The following are some examples of conduct amounting to unfair dismissal:

• An employee refused a direction from a foreman on a work site to train another employee
whom he regarded as scab labour. He was dismissed on the spot. The court found that
the question to determine was whether the legal right of the employer to dismiss had been
exercised so harshly as to be an abuse of that right. The court relied on the fact that the
employee himself had expressed a desire to give 40 hours' notice of resignation to find that
there had not been any act of unfairness.
• An employee was dismissed because he refused to obey an employer's order to do a job
usually requiring two men. The court found this to be unfair as it was an unreasonable
exercise of the employer's rights.
• A storeman was dismissed after a company restructuring which resulted in a personality
conflict with the new manager. This was despite 8 years of valuable and faithful service to
the company.
10. When is severance payment payable?

Retrenchment is a category of dismissals which are based on commercial and economic

considerations. The dismissals may arise for a host of reasons including technological change,
a downturn or seasonality in business and restructuring of the enterprise. In all cases the
employee is dismissed through no fault of his or her own.

The respective rights of employers and employees in relation to redundancy or retrenchment

are now almost exclusively governed by awards and legislation.

Of major importance to the law on redundancy is the Termination, Change and Redundancy
Case 1984 which concerned an application by the Australian Capital Territory Union to amend
the Metal Industry Award. This was a test case. In its decision, the Industrial Relations
Commission (IRC) discussed the general principles to be included in a redundancy provision in
an award. This was to provide stability and consistency and so avoid conflict and uncertainty.
The IRC laid down recommendations in relation to consultation, information, notice,
transmission of business, time off during the redundancy period, employee leaving during
notice period, transfer to other duties of an employee, severance pay, ordinary and customary
turnover of labour, superannuation, incapacity to pay, provision of alternative employment and
notification to the Commonwealth Employment Service. In a Supplementary Decision the
appropriate levels of severance payments were fixed. Following the case, minimum
requirements based on length of service are:

Period of
Continuous Service Period of Notice Severance Pay

1 year or less 1 week Nil

1 to 2 years 2 weeks 4 weeks’ pay
2 to 3 years 2 weeks 6 weeks’ pay
3 to 4 years 3 weeks 7 weeks’ pay
4 to 5 years 3 weeks 8 weeks’ pay
5 years and over 4 weeks 8 weeks’ pay

An employer must hold discussions with employees and unions in circumstances where a
definite decision has been made which may lead to the employee's job becoming redundant.
Employers are not, however, required to disclose confidential information about the
terminations which might be contrary to their business interests.

The general standard prescribed in the TCR Case has now found its way (either in full or in an
amended fashion) into all major Federal and State Industrial Awards.

DIAGNOSTIC MODEL

1. Identify and discuss the factors from the diagnostic model (figure 1.11) that have
significance for the law as it relates to HRM.

Pretty obviously, the legal influences are important. 'Sources of legal obligations' are an
important issue here. Students need to recognise that the law is an external influence. The
reaction by the organisation to accommodate that external influence is an internal matter.
Invariably, laws are enacted because organisations are not capable of voluntarily (internally)
regulating themselves.

Human resource specialists manage people within the employer-employee relationship. It is

the law of the land which governs the boundaries of that relationship. It is therefore essential
for human resource managers to have a basic understanding of the law of employment. In any
legal relationship, there are mutual duties and obligations. The employment arena is no
exception. Employers have obligations to their employees and employees in turn owe certain
duties to their employers. When these mutual duties integrate successfully with the objectives
of the organisation, then the productivity of the enterprise will improve.

2. Explain the impact of the law on the acquisition, development, reward and motivation
maintenance and departure of an organisation’s human resources.

Again, the law is an externally imposed mechanism. Laws exist to protect individuals and the
society. Hopefully, adherence to the law will maintain fairness and equity during all of these
transactions. Students can debate how certain functions have been conducted differently
before and after the enactment of legislation.

3. Discuss the impact that the law may have on commitment, competence, cost effectiveness,
congruence, adaptability, performance, job satisfaction and employee motivation.

The variable not mentioned in the reply to the above question is that of the perceptions that
people have about the utility of certain laws. If perceptions are negative, then the law will
have the effect of reducing commitment, congruence, and performance. If the law does work
as planned, then these outcomes will be enhanced. The positive for management is that they
can blame problems on the legislature, rather than on themselves. This is a problem for
gaining commitment to the law, and for gaining commitment to the intended outcomes.

Soapbox
There are seldom clear answers to these questions. The idea is to stimulate debate as much as
to determine the answer.

Ethical Dilemma
The new chef

Discussion questions
1. If you were Margaret Milkovich, what would you do?

Probably offer the job to someone without AIDS. His sexual preference is not relevant, but
his medical condition may be.

2. Is Tan’s medical condition relevant or irrelevant?

Ultimately, this would have to be determined by a court of law. However, there is a case to
put that Tan’s condition is a risk in this work environment. Chefs are cutting food and may
cut themselves and thus contaminate food.

3. What ethical issues, if any, are raised in this case?

One ethical dilemma is the quandary between being objective about risk to patrons and staff on
the one hand, and risking losing business (perhaps completely) by public knowledge that one
employs a person with AIDS handling food.

Case study
Put it in writing
• How can the company successfully terminate Smart’s employment?

Smart is not covered by any award, so award provisions for terminating him cannot apply.
The company must have adequate reason for terminating Smart. Paying him too much is not
adequate reason. Paying him $120,000 pa. if he is losing the company money may be
adequate reason. The company must not discriminate against Smart, either directly or
indirectly. He must not be treated any more harshly than any other person. The company
must not contravene the Federal Termination of Employment Act. There is no written
contract, so the company should formalise the employment contract with Smart, or else a
court may end up having to do that. Unless Smart has contravened his duties under common
law, the organisation will have difficulty in terminating his employment. Those duties are to
work in a skilful and competent manner; to obey the employers lawful demands; and to
provide faithful service (eg. not to disclose confidential information, to protect the employer's
property, etc). The company will have to come up with adequate reasons to terminate Smart,
and will have to give him adequate notice.

• What restrictions apply to Smart if he leaves and works for an opposition company?

He must not disclose confidential information. He must account for and protect company
property. Any discoveries or inventions must remain with the company.

• What happens if Smart joins a competitor and then provides confidential marketing and
technical information to his new employer?

Superstick Pty Ltd would have recourse to the common law to take action against Smart.

• What happens if he lures away and hires other staff currently employed by Superstick?

The same would apply.

Discussion questions
1. If you were Lisa Issacs, how would you respond to the managing director’s questions?

The above responses would be a good start. Lisa would need to strongly advise the company
to formalise its relations with Smart immediately. Lisa should also demand clarification as to
exactly why the organisation may want to terminate his employment. Lisa should go through
this process with the Managing Director before a court of law goes through the process at
much greater expense.

2. Draft an employment contract which Superstick could have used when hiring Smart.

Some suggestions that students might like to include are:

Duties of Superstick Pty Ltd:

• to pay a base salary of $40,000 pa.
• to conduct annual reviews of salary and other remuneration.
• provision of appropriate job title.
• provision of adequate and relevant training.
• specification of how successful performance in this job can be measured.

Duties of Peter Smart:

• to work the hours necessary to perform the job, namely a minimum of 40 hours per
week, exclusive of public holidays, annual leave, etc.
• to answer to the Managing Director for all business decisions.
• Other duties can be determined from a job description. A Job Description probably
does not exist, but some key elements which should be in it might be
 - that the marketing department be run within budget;
- his position in the organisational structure;
- his correct title;
- a Job Summary, stating why the job exists and its purpose;
- his key duties and responsibilities;
- reporting relationships: who reports to the position and who he has most
contact/interaction with;
- the types of decisions that can be made without reference to a superior;
- the assets which are controlled by this position;
- a career path for a person in this job;
- salary, bonuses, overtime and company car.
- special requirements: eg. ability to work shifts, travel interstate / overseas, be
away from home for extended periods, work irregular / long hours;
• an obligation of confidentiality.
• A Job Specification probably does not exist either. Some of the elements that should
be included in this document are:
- qualifications;
- skills, abilities, and knowledge: including those gained form experience;
- personal qualities: personal qualities (physical / psychological) required to
successfully perform this job