Paddy Ryder has been in the news lately. Not just because of his talent but because of the drama surrounding his recent move from crisis-plagued Essendon to current AFL darling, Port Adelaide.
Ryder's actions have been of keen interest to football fans and lawyers alike as we try to understand how an employee, in this case a footballer, can be allowed to walk out on a contract mid-term.
In mid-2012, Ryder entered into a four year contract with Essendon. At the same time, Essendon entered into a supplements program whereby it injected players, including Ryder, with "cutting edge" substances. ASADA and the AFL allege that Essendon injected players with prohibited substances.
When Ryder moved across to Port Adelaide at the end of the 2014 season, Ryder's four year deal at Essendon still had two years to run. So how did Ryder move to Port Adelaide while still contracted to Essendon? Why did Essendon allow this to happen?
Ryder alleged that by requiring him to participate in the supplements program, Essendon had failed to provide him with a safe workplace. As a result, Ryder argued that Essendon had breached or repudiated its contract with him, enabling him to leave the club as a free agent. The repudiation concept remains untested as Essendon reached an agreement to trade Ryder to Port Power without the need for litigation.
By allowing Ryder to walk, did Essendon accept their alleged breach? Or did they simply not have the stomach or finances for further litigation? Regardless, several legal questions remain.
What is repudiation?
Repudiation occurs when one party to a contract does something that indicates that it no longer intends to be bound by the contract. Ryder's case for repudiation by Essendon appears to have been that Essendon failed to provide him with a safe workplace by requiring him to be injected with a prohibited substance. Even if, as many claim, the players were not injected with a prohibited substance, Essendon's lack of knowledge about the "pharmaceutical experiment" was arguably a significant failure in governance at the Club. This may, of itself, have been sufficient to assert that Essendon was an unsafe workplace in 2012.
In a corporate workplace, repudiation can simply involve significantly changing the employee's role. For example, you employ a high flying senior manager and a year into the contract you decide that they are not the right fit for the role. You make significant changes to the employee's terms and conditions of employment without their consent. The employee is now in an ideal position to argue that you have repudiated the employment contract and, if successful, claim compensation for loss arising because of your conduct.
The consequences of repudiation
If the employment contract doesn't specify a notice period, then you may be required to make payment in lieu of "reasonable notice", which could be up to 12 months' pay depending on the seniority of the employee. A fixed term employee whose contract is repudiated at the initiative of the employer could be awarded payment for the duration of the contract, as would have been the case with Ryder had it not been for the trade.
The flip side for employers
Employees can also engage in conduct that repudiates an employment contract. This may enable employers to escape an unfavourable arrangement, so it is worth keeping this in mind when your employees aren't doing the right thing.
Behaviours by employees that can constitute repudiation of a contract may include their refusal to carry out your lawful and reasonable instruction, particularly if it forms a significant part of their role.
If an employee does repudiate a contract then you have two options: you can either treat the contract as at an end or affirm the contract and insist on performance. However, once a decision is made to affirm the contract you cannot later rely on the repudiation as grounds for termination of employment.
What of the other football players?
All current players affected by the supplements scandal, both in the AFL and NRL, could potentially argue that their contracts have been fundamentally breached by their employer in the same way as Ryder, resulting in walk outs or compensation. Only time will tell whether this becomes a reality.
Lessons for employers
Lesson 1: Avoid giving employees a "free kick"
Ensure that all directions or instructions that you give to your employees are lawful and reasonable.
For example, seek the consent of the employee if you want to change their role or duties. If the employee does not give consent then check the terms of the employment contract to determine whether it covers the proposed change.
In addition, any work that you require an employee to perform must be able to be undertaken safely. An employee will be within their rights to refuse an instruction if it is inherently unsafe.
Lesson 2: Carefully consider your "game plan"
If you become aware of a significant breach by an employee, check the employment contract and act quickly if you want to accept the conduct as bringing the employment relationship to an end.
Remember that you cannot change your mind once you have elected to accept or affirm the employment contract.
Lesson 3: Avoid the tribunal
This is an extremely complex area of the law. All of the circumstances of the employment relationship need to be considered to work out whether your conduct will amount to a breach, or whether the employee's conduct warrants termination.
To avoid legal proceedings, make sure that you seek independent legal advice before taking any action.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.