The question of law occurred in the given case law is whether Great Games can prevent Joey from working with the CAN as per the conditions of employment contract or not.
The employment of an individual in the United Kingdom is governed by the employment contract held between the employee and his employer by determining the conditions of employment under the law of Country. This contract specifies the terms of employment which are legally binding on both employee and employer. Generally an employment contract comprises the terms and conditions regarding the pay rate, hours, benefits, duties, job procedure, termination policies, grievance procedure, over-time requirements and confidentiality (Lestari, Sova, and Njatrijani, 2017). The breach of any of these terms by the parties shall result into a legal action against the breaching party.
In today’s high competitive business environment, it is required for the companies to protect its valuable resources to attain the success. For such purpose the company imposes certain restrictions on its employees to use the information of business and customer contacts. To make the employees legally restricted in context of business protection, the employer inserts certain clauses in the employment contract which are required to be followed by the employees during employment and post-employment (Skiba, 2019). These clauses implied for the protection of information in business is known as restriction covenant which prohibits the employees from competing with their ex-employers and dealing with the ex-employer’s customers for a specific period of time after they left the ex-employer. The restrictions can be imposed by inserting following clauses in the contract:
This clause may impose restriction on the ex-employee for a specific period of time after the termination of his service tenure. It also stops the employee from setting up a similar business to the company he have just left. Today, almost every company imposes this restriction on its employees to maintain the confidentiality of critical and valuable business information which could be used by the competitors against the company (Twomey, 2017). The clause of non-competition prohibits the ability of employees who sign the agreement to go into business against the employer within a certain geographic area for a certain period of time. It prevents the employee who has just left the company by engaging in any business of a similar nature, in the role of an employee, owner, independent contractor, investor, and in other forms of competition. On the breach of such clause by the employee, the employer may represent the claim before the Court against the employee in default.
However to enforce the non-competition clause of the contract the employer has to justify the reasonability of this clause before the Court. While analyzing the non-compete clause the Court sees the requirement of this clause in the business of employer. For such purpose the presence of legitimate interest in business is analyzed which needed to be protected. Also the geographical restriction and period of agreement determined in the clause is considered. In addition to this the additional benefits and compensation made by the employer to employee in return of signing such clause is considered by the Court.
This clause prevents the employee from having deals or working with his previous clients. It is also known as the locking-in the clients even if the clients approach the employee for his trustworthy advice (Azevedo, Pereira, and Rodrigues, 2016).
Non-Solicitation Clause: This clause also prevents the employees from having contact with the clients of Ex-employer for a specific period of time after the termination of job. However after the time set aside for the restriction is up, the ex-employer has no right to prevent the employee from dealing its clients unless the employee deliberately removed the confidential data of those clients.
Generally the employer uses this clause for preventing the departure of key employees with the termination of one employee. Hence to escape the company from mass departure of staff, this clause can be imposed in the employment contract of the employees.
All these clauses are called as the restriction covenant in the employment contract and the breach of these covenants leads a legal action on the employees (Shi, 2017). However to enforce such covenant before the court, the employer needs to prove certain legitimate and reasonable facts of business.
In the given scenario, Joey was working with the Great Games Pty. Ltd as a computer programmer for two years. The employment contract of Joey comprises the clause that “he will not for the duration of the employment contract or for a period of one year after the conclusion of the employment undertake design activities in Australia for the purposes of the production of electronic games or any other form of entertainment” (Kini, Williams, and Yin, 2018). This clause prevents him from working for another employer having similar business for a period of one year after the termination of services with Great Gamed Pty. Ltd. However before the completion of his service tenure with Great Games Pty. Ltd, he received an offer of job from Computer Animated Films Inc. (CAN) for five times more of his current salary which he decided to accept. In that case the great Games Pty. Ltd has the right to stop Joey from accepting the offer made by CAN as he signed the non-competition clause under his contract of employment. Joey was working as a computer programmer in the company hence he was well-known with several important technologies and policies used by the companies in creating the game designs (Jerrold, 2018). Therefore he was engaged in a legitimate business interest of the company which may destroy the competitive advantage of Great Games Pty. Ltd.
The entire analysis of rules and laws related to the non-compete agreement reveals that Joey can be prevented by the Great Games Pty. Ltd and in case of breach performed by the Joey; the company may enforce such agreement in the Court. This breach of condition may lead to a legal action against Joey or the Court enforces him to follow the conditions of contract and complete his employment with Great Games Pty. Ltd.
In the given case law, an appropriate business structure is required to be suggested to harry for opening of his bakery.
There are several business structures to start a business and each structure has its own benefits and limitations. The selection of business structure depends on the available resources for business and number of members. Various business structures include sole proprietorship, partnership, limited liability partnership and limited company. The business structure of sole proprietorship is most favorable option to start new business for an individual with limited resources and minimum capital amount (McKay, Carr, Rothwell, Wiley, and Scherer, 2019). It is also known as sole trader because it requires only one member to start the business. It is the simplest and most popular business structure adopted by the individuals when they have limited resources and capital. This business structure comprises several advantages which include:
Easy to Start:
A Proprietary business can be formed quickly and easily as it does not require lengthy legal formalities. Also there is no need to enter into various agreements with the directors, employees and other stakeholders.
Economical and Efficient Operations:
The individual owner can put his available resources together to the best use. There is not several compliances and registration requirement for starting a proprietorship business. Also it has no impositions of different government fees and charges which minimize the cost of opening (Muthee, 2019). He can maintain the cost of business as per his requirement and take the steps to remove the irrelevant costs. The sole trader has no risk of rivalry with other colleagues and threat to lose his control over the business.
Control and Quick decisions: The sole trader has entire control over the business. He does not need to answer anyone for his taken actions in the business. He may take the best decisions in the interest of business without the interference of another person which also helps to take quick decisions. The quick decision-making helps in obtaining new business opportunities timely.
Simplified Tax Reporting:
The imposition of taxation liabilities on the sole proprietorship is less complex and comes with easy reporting requirements. The sole trader has no separate taxability for the business (Eniola, Iyabo, and Peter, 2018). Also there is no requirement to file any separate tax forms with different governments.
The sole proprietorship is not required to file any formation documents or annual reports with the federal or state governments which helps to keep the information of business private (Surban, 2018).
No need of different experts:
A sole trader can offer his personal skills and experience to his work and there is no requirement to hire different experts for several departments such as accountant, legal expert or managers.
Easy to wind up: This business structure has no complex procedure and compliances for closing the business (Kim, Lee, and Sohn, 2020). The owner can decide to close the business at any time by settling its debts and liabilities.
In addition to that there are several other benefits of a sole proprietorship business structure. This business structure does not consist a separate legal entity hence the losses of business can be undertaken for reducing the tax bill of owner.
In the given scenario, Harry wants to start a bakery as he has the experience in the works of bakery which includes the making of cakes, pastries and bread. He has the saving for an amount of $50,000 in cash which he wants to invest in his bakery business. Although Harry has several options of business structures to commence his new bakery but as per the available resources and capabilities, the sole proprietorship structure of business would be most suitable option for him. Harry has an amount of $50,000 to invest as the capital of business and want to open a bakery which needs no agreements and contractual transactions with different parties. By investing the amount for the commencement of bakery he can start his own business by having the ultimate power in his hands (Trad, and Freudenberg, 2017). Also he has experience in the bakery working which will help him to run his business effectively without any interruption. He has already found a place for operating his bakery business which he can take on lease. In sole proprietorship business, Harry won’t need to file a separate tax return for the business and also adjust the losses of business in his personal taxability.
In addition to this, the sole proprietorship business structure does not need involvement of different experts and specialist and in the given case Harry has the qualification of bakery business hence he can efficiently handle the working of his business. Also he has a less amount to invest in the business therefore to start a business with minimum cost, he may go for the sole trader business structure as it does not include wider complying requirements and high government charges for registrations and reporting (Liu, Chang, and Fang, 2019). However, he may also go for the partnership business structure but in such structure of business he would not have full control and entire profit of the business. Hence Harry should go for the sole proprietorship business structure for starting his bakery business.
It could be inferred after considering the benefits and functions of sole proprietary business structure that it would be most appropriate business structure for Harry to start his bakery business as it needs minimum capital and has lowest compliance and reporting requirements.
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