Employers should be aware that varying an employee’s duties and responsibilities may have the effect of repudiating the employment contract, particularly if it materially impacts on the employee’s status within the organisation or industry.
In a recent decision a court held that the hiring of a new executive in essentially the same position as an existing executive had the effect of causing the “repudiation” of the employment contract of the person who first held the position.
“Repudiation” is a legal term that essentially means that one party has refused to perform a term of the contract. The test is whether, objectively, the conduct of one party would be viewed by a “reasonable person” to be a renunciation either of the contract as a whole or of a fundamental obligation under it.
In this case, the employment contract identified the title of the position, but provided no specific detail about the executive’s role within the firm. The employer appointed a new person with duties that were essentially the same as those duties that the executive had been fulfilling. The court found that even though those duties had not been specified in the employment contract, the conduct of the employer in appointing someone to fulfill essentially the same duties was conduct that suggested that they were not going to want to continue to require the executive to fulfill that role (given they now had someone else to fulfill those duties) and that therefore this showed an “unwillingness or an inability to render substantial performance of the contract”.
Consequently the employer was found to have “repudiated” the contract, entitling the executive to damages for the breach of that contract. In this case the damages amounted to nine months salary.
This case is an excellent reminder that an employee’s duties and responsibilities are just as important, if not more important than, the employee’s title and remuneration.
If you are planning to vary an employee’s duties and responsibilities, you must be very careful that in doing so, you do not cause a repudiation of the employment contract, particularly if such variation will materially impact upon the employee’s status within your business or industry.
If you would like advice about employment contracts, dealing with contractors, or any other employment issues you may be having, send an email enquiry to [email protected] or phone us on 02 8006 0830 and we will organise a time for a confidential discussion.
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