HI6027 Case Studies of Business Law and Business Structures Assessment Answer
|Business Law and Business Structures|
Issue of matter
The question of law occurred in the given scenario is whether Joey can be prevented from his current employer, Great Gamed from accepting the employment offer from another employer.
Contract of Employment: A contract of employment is an agreement made between an employee and employer in context of his employment. This contract comprises several terms and clauses according to which the employee and employer are legally bound to perform. Usually the employment contract consist the conditions determined in context of pay rate, hours, duties, benefits, job procedure, dispute resolution procedure, over-time policies and confidentiality. These conditions are mutually determined by both the employer and employee thus they both are equally responsible to meet the terms of contract (Ghosh, and Shankar, 2017). Generally, the conditions are prescribed by the employer while making the appointment of employee and the employee gives his consent on the conditions by signing the contract, therefore it is a mutually determined contract for the employment and the breach of it may cause legal penalty on the defaulting party.
Along with these terms and conditions of employment, employers of modern business environment also insert some restriction clauses in the contract for the employees. The purpose to insert these clauses in the contract of employees is to protect and maintain the confidentiality of business by the organizations. Every organization has some core qualities and techniques through which they perform in the market therefore these techniques or qualities are valuable for them and needs protection (Kini, Williams, and Yin, 2018). Hence to make the employees legally obligate to follow the restriction clauses, the employer implements these terms into the employment contract. These restriction clauses are called as restriction covenant. The employees are required to follow the restriction covenant while working with the employer and post-employment. Some of the general restriction covenant includes the following:
It prohibits the employees to work with any of the competitor of employer for a specific period of time after expiry of his employment. Also, it prevents the employee to begin a similar business to the employer to create competition. This is done by the employer to protect the confidentiality of valuable and critical business information and data which can be used by the employee in the favor of competitors. This clause may be imposed to restrict the employee from performing with specific business industry or within a particular geographic area (Shi, 2017). However, while determining and imposing these restrictions on employment of employee, the employer has to ensure that the employee is engaged in a profile which is associated with confidential and valuable data of business. If an employee performs a breach of restriction covenant then the employer may present a claim against him before the Court.
Further the employer is also responsible to prove the justifiability of implementation of restriction covenant in the employment contract. In case of claim made by employer against the employee for the breach of restriction covenant, the Court would see the legitimacy of requirement of such clause in the contract of employment. Hence to prove the requirement of restriction clauses, the employer needs to show the legitimate business interest which is needed to be protected. For instance, the employer cannot impose such restrictions on a person who worked as a peon of the company as he does not carry any confidential or valuable information of business. In addition to this the fairness in regards of period for restriction and geographic limits are also considered by the Court. An employer cannot impose the restriction on an employee for a longer period or lifetime period (Bernstein, 2019). Similarly, an employee cannot be prohibited to work beyond the local limits of employer. Also, a compensation amount should be promised or paid to the employee by his employer for the signing and accepting the restriction covenant imposed by the employer on him.
- Non-dealing clause: This clause restricts the employees not to deal and also not provide any kind of advice to clients of previous company. This clause protects the company to maintain their clients even after employee who deals with it, left the company (Watkins, 2016). It maintains the business client relationship between company and client.
- Non solicitation clause: Solicitation basically refers to steal something from someone. In this clause, company tries to protect themselves from soliciting the clients through their employees (Twomey, 2017). Employees are to be banned from not to contact clients during post termination period.
- Non- pouching clause: This clause prevents engagement of employees with the clients of previous company. Any kind of agreement, contact, legal contract or guarantee create loss of business if it will made with non-employed person (Azevedo, Pereira, and Rodrigues, 2018). For this purpose, company put restriction on their employees that they will not come into contact with clients of the company even after left the job.
In this case, Joey (Game programmer), signed a contract with Great Games Pty. Ltd to work with the company. Terms and conditions of Great Games company said that “Joey will not leave the job unless complete 2-year term duration and even after 1 year the completion of the employment for the designing the gaming applications in Australia. This was a legal contract between Joey and gaming company. During the employment, he received a job offer from Computer Animated Films Inc. (CAN) and get opportunity salary that was five times of previous job (Segal, and Choi, 2016). This was the great deal for Joey and he decided to accept this offer and left the Great Games company. Here is Joey, without any legal knowledge, breach the contract of employment and Great Games can challenge this breach in the court and stop the Joey to left the job.
As abovementioned features of contract of employment, it suggested that terms and conditions of contract can legally bound someone. Here Great Games Plc Ltd have right to challenge this contract in court. This contract restricts the Joey to not left the Job or may reward as a compensation of breach of contract.
Issue of matter
Business structure are to be suggested and provide bye laws regarding this structure suitable for opening bakery business to harry.
Sole proprietorship is a business organization and it’s the most suitable form for small businesses especially in the case where individual has no enough working capital and resources to start a new business. This form of business is particularly common in areas of personalized services like shops, parlors, hair salons (Kuter, and Gurskaya, 2020). Silent features of the sole proprietorship form of organization are as follows:
- Formation and closure: There are no separate laws that govern sole proprietorship. Hardly any legal formalities are required to start a sole proprietorship business though in some cases it is not require a license. Closure of this form of business is also not so complicated, no legal formalities required before closing this
- Liability: It has unlimited liability. This implies that owner is personally responsible for payment of debts and also owner of all assets. As such the owner’s personal possessions could be sold for repaying the debt without someone’s permission.
- Sole profit recipient: A sole proprietor directly reaps the benefits of her/his efforts as he/she is the sole recipient of all the profits (Kim, Lee, and Sohn, 2020). The need to share profits does not arise as he/she is the single owner. This provides maximum incentives to the sole trader to work hard.
- Confidentiality of information: Sole decision-making authority enables the proprietor to keep the information related to business operations confidential and maintain secrecy. A sole trader is also not bound to disclose any information by any laws.
- Sense of accomplishment: There is personal satisfaction involved in working for oneself. The knowledge that one is responsible for success of the business not only contributes to self-satisfaction but also instills in the individual a sense of accomplishment and confidence on one’s ability.
- Control- The right to run the business and make all decision lies absolutely with the sole proprietor (Hurst, 2018). He can carry out his plans without any interferences from others.
- Freedom in making decision- A sole proprietor enjoys considerable degree of freedom in making business decision. Further the decision making is prompt because there is no need to consult others. This may lead to timely capitalization of market opportunities as and when they arise.
- Less working capital: Sole proprietorship is single owned managerial business. There is less requirement of day to day running capital which is basically burden on the business. Working capital can lead debts on single owner.
In addition to abovementioned features there are many more advantages also found like require less experts, not required tax audit of sole proprietorship, less paperwork, less registration fees in the departments, minimum charges etc.
As per given case, Harry who wants to operate a business recommended that he should go with the option of sole proprietorship. As stated, that harry have savings for $50,000 in cash which he can introduce as a capital for his business and he also have experience in bakery making items like cake, biscuits, bread or many more so, he has not to require working staff to making such things (Dey, 2018). Harry can opt other business structure also but sole proprietorship is most suitable to him. He has not taken burden to comply legal formalities or other form of registration fees that require so much funds. Harry invest his all savings on his essential and also, he found a place to open bakery that is enough for him. Sole proprietorship is not difficult as compare to other form of business.
As per given scenario, he advised to spent his all money on business and with their experience he solely earns more profits without interference of anyone. Harry also would not require to file tax report on his income. In case any difficulty he found, he can easily close his business and sell all assets to get back his investment.
As per stated abovementioned discussion, it concluded that with limited resources and investment can make man a businessman. Sole proprietorship is most suitable option for those who have not enough equipment, working staff. Harry is one of those who have not money and knowledge but he has an experience in his field.