They will generally operate for a specified period of time post-employment. What is post employment restraint? Can employers use a restraint clause? Are post employment restraints unenforceable?
How long is a restraint period? Restraints may involve non-competition or non-solicitation.
Although the following statement of the law is based upon legislation in New South Wales, it mirrors the common law in Western Australia. In order to be enforce such a restraint must be carefully drafted as, at common law, an unreasonable restraint is void for being contrary to public policy. Post-employment restraints are presumed to be invalid and unenforceable unless it can be shown that they are genuinely necessary to protect commercial interests. The onus is on the employer to demonstrate that a clause imposes no greater restraint than is reasonably necessary to protect these interests.
However, employers must be able to produce evidence that a post-employment restraint is necessary to protect its business – and the terms are reasonable. Protecting the interests of a business, including confidential proprietary information and customer relationships, is increasingly challenging for business owners. The law offers only limited protection of confidential information and in the modern context, in which information is more vulnerable than it has ever been, it is important to ensure that your employees are.
Neither statute nor common law impose post employment restraints on a former employee’s ability to gain future employment. Accordingly, the only avenue for imposition of the restraint is in the contract of employment.
A restraint that prevents an employee from working for all and any competitors in an industry will, in most cases, be unenforceable. Fair Work Commission applications (2) Fair Work Commission decisions (6) General (47) Leave provisions (17) National Employment Standards (1) NSW Fair Trading (2) People Management System (2) Post employment restraint (4) Probation (1) Professional indemnity insurance (1) Real Estate Industry Award (15) Recent court decisions (3) REEF. Covenants in restraint of trade clauses are deemed to be prima facie void as they are contrary to public policy, but they will be upheld where the restraint is reasonable to protect a legitimate interest. However, they can be upheld if the employer can demonstrate the restraint clause is reasonable. Importantly, the restraint of trade clause relied on was not contained in an employment agreement, but an agreement to sell his shareholding in the company.
Justice McDonald found that the restraint afforded reasonable protection of the purchaser’s goodwill in the company that could be attributed to the shareholding. The ‘reasonableness’ of a restraint is assessed by a court at the time the contract was made, not at the time that it was breached. Therefore, what experience or seniority that was gained during the employment and what work was ultimately performed by an employee is not relevant to whether a restraint provision is enforceable.
It’s a common misconception that a post-employment restraint in an employee’s contract of employment isn’t worth the paper it’s written on. A post – employment restraint clause is vital in ensuring that an employee does not take several of your clients, establish a competing business nearby or approach other employees of your company in an attempt to have them work with the employee. Post – employment restraints must be carefully drafted as an unreasonable restraint is void. Employment contract containing post – employment restraint clause signed by CFO A large clothing retailer with outlets all over Australia employed a chief financial officer (CFO), based in Victoria. The CFO had worked in finance at a senior level in various industries, including apparel retail, although some considerable time prior to the events.
Failure to have regard to the law may mean that the restraint has little chance of being enforced. Complete and accurate employment records must be kept in a form that is readily accessible to a Fair Work Inspector, and the records retained for a minimum of seven years, for both current and former employees. A common misconception is that post employment restraints cannot be enforced.
The common law provides that a covenant in restraint of trade will be presumed to be unenforceable, however a clause will be enforceable if the employer can prove that it is reasonable, and no more than is reasonable, to protect a legitimate business interest. Courts justifiably refuse to enforce restraints of trade on the grounds of public policy.
Post-Employment restraints are specific terms in employment contracts or shareholder agreements that may restrict your conduct after you leave your employment. Examples are terms which stop you from approaching your former employer’s customers or from working for a competitor for a period of time. Perhaps the most common form of post – employment obligation, restraints of trade are contractual clauses that limit the ability of employees to move from one job to another and take their clients, knowledge or colleagues with them. One of the trends with employment contracts is the inclusion of extensive restraint of trade clauses, where employees who leave your organisation are restrained from working in competition with your business in a geographic area for a period of time.
When you first look at it, restraint of trade clauses sounds like a good idea. At common law, post-employment restraints of trade are on the face of it invalid as infringing public policy. A restraint clause in an employment contract will only be enforceable if the restrictions imposed are no more than necessary for the protection of the employer’s legitimate business interests.
Such restraints can significantly impact your career path and ability to obtain new employment. The law surrounding post – employment restraint of trade has increasing importance in workplace relations law and practice. The historical assumption that employers have a stronger commercial position and employees are vulnerable has been exploded in the 21st century by a highly educated and skilled workforce both geographically and occupationally mobile.
The post – employment restraint in the contract of employment may say, for example, that within a period of months from the date of termination of your agreement, you are prohibited from working with a competitive company located anywhere in the eastern seaboard of Australia. Post employment , the restraint of trade clause operates as a means by which an employer can prevent departing employees from competing with the business for a period of time after they leave. A non-compete clause is a way for the employer to make the employee promise not to take away what they have gained while under the employment of the company and use it against the company while working for a competitor. The Court of Appeal noted there was no Australian authority for upholding a restraint of trade clause where an employer repudiated the contract and. If you are an employer, you may be considering including a post – employment restraint of trade clause in your employment agreements.
The restraints that you may be looking to impose on an employee can vary. That sai casual workers should be hired in a fair and transparent manner, and there should be evidence that in the opinion.