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Norman Waterhouse

 

 

Normans Briefly

In this issue

Welcome to the July edition of our Corporate and Commercial Briefly.

>   Employment – Superannuation guarantee now 9.50%
>   Estate Planning – The EPOG is dead, long live the ACD
>   Employment – How to deal with a break up: restraint of trade

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Employment – Superannuation guarantee now 9.50%

The second of the superannuation guarantee increases scheduled by the former Labor Government has occurred, with the minimum contribution rising from 9.25% to 9.50% on 1 July 2014.

The Coalition Government’s original intent was to freeze the superannuation guarantee at 9.25%. An attempt was made late last year to implement this freeze – well ahead of 1 July 2014 – but this attempt, which was tied to the original mining tax repeal attempt, was thwarted in March 2014. Now that the 1 July 2014 increase to 9.50% has occurred, the present Coalition Government position is that the superannuation guarantee will be ‘frozen’ at 9.50% for three years, with annual increases resuming on 30 June 2018 (with an increase to 10.00%). However, this proposal is again tied to renewed mining tax repeal effort, which has faced difficulties in Federal Parliament and remains unpassed during the present Parliamentary winter break.

In any event, the bottom line is that, since 1 July 2014, employers must make superannuation contributions of at least 9.50% in respect of all employees. This will be the case for the entirety of the 2014/15 financial year. The position in respect of future financial years remains unclear.

For more specific information on any of the material contained in this article please contact Sathish Dasan on 08 8210 1253 or sdasan@normans.com.au.



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Estate Planning – The EPOG is dead, long live the ACD

As some of you in the estate planning field would know, the Advance Care Directives Act 2013 (Act) came into force on 1 July 2014. The Act means that powers of guardianship, medical powers of attorney and anticipatory care directives, no longer exist and have been superseded by the new Advance Care Directive.

The reason for this change is to provide medical professionals with more certainty around the form of the document which appoints a person’s substitute decision makers, and allows those professionals to become more familiar with a single form, rather than the variety of documents prepared by various lawyers.

In practical terms, the change means that a person needs to express their wishes, and their appointment of a substitute decision maker in a prescribed form for that to be valid, and then have that document witnessed by a broad class of people, including lawyers, bank managers, police officers, doctors and veterinarians, amongst others.

The form is relatively simple (and available here) but the “DIY kit” which accompanies it (available here) runs to some fifty pages and is filled with example statements which, although well intentioned, may confuse donors and cause ambiguity at the point that the Advance Care Directive needs to be used. To avoid confusion, we suggest that the terms of the Advance Care Directive be kept simple, and donors speak with their substitute decision makers to ensure that they know the wishes of the donor.

Witnesses to Advance Care Directives should be aware of the obligations that arise upon witnessing an Advance Care Directive, as well as the stiff penalties under the Act, which would include making a false statement in relation to the requirements of witnessing being met.

The Advance Care Directive is here to stay, so if you previously dealt with powers of guardianship, medical powers of attorney or anticipatory care directives, you will need to understand them.

For more specific information on any of the material contained in this article please contact Mark Henderson on 08 8210 1220 or mhenderson@normans.com.au.



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Employment – How to deal with a break up: restraint of trade

From the recent outcome of the case of RNTT Pty Ltd v Constable [2014] SADC 78 (the RNTT Case), we are provided with an opportune moment to remind our readers about ‘restraint of trade’ post-employment. 

The RNTT Case sets a good example on how courts, particularly in the South Australian jurisdiction, will approach restraint of trade post employment.

Facts

Mr Constable (the Employee) was employed as a State Manager by RNTT Pty Ltd (the Employer) from 6 December 1994 until 28 June 2011. On 15 August 2008 a ‘more detailed’ confidentiality and restraint agreement (Restraint Agreement) was signed, which was in addition to the employment contract. One of the key terms of the Restraint Agreement was that the Employee would not solicit the Employer’s clients for six months following termination of his employment.

The Employer claimed that the Employee during his employment and the restraint period under the Restraint Agreement had worked on his own account for at least one of the Employer’s clients.

There were also issues regarding the Employee’s fiduciary duties, and breach of implied terms of his employment contract for servicing his own account with the Employer’s client while he was still employed by the Employer.  However, for the purposes of this article, we will deal solely with the post-employment restraint aspect of this case.

What is a reasonable restraint of trade clause?

It is important to note that Courts will only enforce a restraint of trade if it is deemed reasonable. In determining what is reasonable will often be dealt with on a case-by-case basis as it depends on a number of factors.

In the RNTT Case, the South Australian District Court was guided by Australian and English case law in determining the standard of reasonableness to be applied to post-employment restraints. The following three key factors were determined:

  • First, the protectable interests of the employer must be identified. The nature and geographical spread of the employer’s operations, the location of clients and the goodwill of the business are relevant.
  • Second, the status, functions and duties of the particular employee must be determined. The degree of contact between the particular employee and the clients, the level of seniority and responsibility within the structure of the employer’s operations and possession of (or access to) trade secrets and confidential information belonging to the employer are all relevant factors.
  • Third, a decision must be made as to whether, in the light of these matters, the particular restraint imposed goes no further than to safeguard the employer’s protectable interest.

Findings

Based on the aforementioned approach, the Court held that the Employee had been a long-time senior employee and was the principal contact between the Employer and many clients. Accordingly the Restraint Agreement was not unreasonable given the clientele of the Employer and the position of the Employee. In this case, preventing the Employee from working for clients of the Employer irrespective of the geographical location was held to be a reasonable restraint.

Furthermore, the Court held that the six month restraint period was reasonable given the Employee’s position and the ability to solicit clients, which did occur.

The Court found that the Restraint Agreement entered into by the Employer and the Employee was reasonable and enforceable.

Decision

The Employee had breached the terms of the Restraint Agreement by working for one of the Employer’s clients during the restraint period.

The Employee was ordered to pay damages to the Employer for work he did during the restraint period, and account to the Employer for the monies he had received from the Employer’s client during the restraint period.

Take home messages

Employers are in a difficult position when trying to enforce a restraint of trade clause, as there are many hurdles to prove. Furthermore, even though not an issue in the RNTT Case, restraint of trade clauses are time dependent – if the employer waits too long to act upon such a clause, the Courts are less likely to grant an injunction. Also, a restraint of trade clause must be specific in identifying the legitimate business interests of the employer. It is important to remember that each case should always be dealt with individually.

A carefully drafted post-employment restraint clause is a valuable tool for employers in protecting their legitimate business interests.

Norman Waterhouse has significant experience both in drafting and enforcing such restraint provisions. For more specific information on any of the material contained in this article please contact Lincoln Smith on 08 8210 1203 or lsmith@normans.com.au or Ganesh Krishnan on 8217 1395 or gkrishnan@normans.com.au.



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