Home' Executive Employment Contracts : Issue 1 Contents 19
Employees’ implied duties
As a matter of law, all executives have an implied duty to:
A. obey all lawful and reasonable directions;
B. exercise reasonable care and skill; and
C. observe good faith and fidelity towards the employer.
A. Duty to obey all lawful and reasonable direction
An employer has the power to give directions to an executive and to expect
the executive to follow those directions. However, an employer’s directions
must be “lawful and reasonable”. Certainly, an executive is not required to
obey an employer’s direction if that would require him or her to engage in
unlawful conduct, or if the direction is unreasonable.
Whether an employer’s direction is “reasonable” will depend upon the scope
of the services that the executive has been engaged to complete. This may
be a matter of express agreement, or may be inferred from the executive’s
engagement in a specific capacity. In addition, this obligation may be
affected by the particular terms of the executive contract.
B. Duty to exercise reasonable care and skill
The common law has implied a duty that an executive be “able to and will
exercise reasonable care and skill in carrying out his or her duties”. As
such, executives are expected to perform according to the standard of skill
and competence that can be reasonably expected of someone with their
experience and training.
C. Duty to observe good faith and fidelity towards the employer
It has been long acknowledged that executives owe duties of good faith and
fidelity to their employers. These duties are manifested in a number of terms
ordinarily implied into employment contracts. Aspects of these duties include:
A duty not to compete: During his or her employment an executive has
a duty not to solicit an employer’s customers for the purpose of competing
with his or her employer. Whether an executive is in breach of this duty
will depend upon the circumstances of the case, including whether the
nature of the work is similar to the work being done for the employer, and is
undertaken with or without the employer’s knowledge.
Executives are encouraged to obtain express and informed consent from
their employers before seeking to undertake any outside business ventures.
Unauthorised use of the employer’s property: Executives must preserve
an employer’s property interests and must not exploit an employer’s
property (including intellectual property such as customer lists) for personal
gain without express and informed consent from the employer. Where an
executive leaves his or her employment and remembers certain customer
details, he or she would generally be permitted to use that information,
provided that information is not confidential information of the employer and
the executive is not limited by a relevant post-employment restraint.
An employer’s property includes intellectual property rights created by the
executive in the course of their employment. This means that patentable
inventions, copyright works, trademarks and designs created in the course
of work will generally all belong to the employer. Where intellectual property
rights are found to belong to an employer, an executive will not be permitted
to exploit that intellectual property in future employment.
Misuse of confidential information: An executive is under a duty to protect
an employer’s secrets, both during and beyond the employment relationship.
However, this duty only applies to genuinely confidential information and
does not include all knowledge, skill, experience or information that an
executive gains in the course of employment. Where information is of a
genuinely confidential nature, an executive may be prevented from divulging
that information after termination of the employment contract.
Is there a mutual obligation of trust and confidence?: Until recently,
there was a degree of uncertainty about whether Australian law recognised
and implied into employment contracts a duty of mutual trust and confidence.
The High Court decision of Commonwealth Bank of Australia v Barker 
HCA 32 recently ruled that such a duty should not be implied in contracts
of employment. Similar obligations may however still arise through express
terms in an employment contract and/or employer policies and procedures
that are incorporated into an employment contract.
Employers’ implied duties
Employers have an implied duty of reasonable care requiring them to take
care as to the safety of their executives’ work environment. There are three
common aspects of this duty:
► the provision of competent staff;
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