The problem with restraint clauses in employment contracts. Is the restraint of trade clause reasonable? How to maximise the protection of a restraint of trade clause?
What is a restraint clause in employment agreement? What are the two types of restraint clauses? Restraint of trade clauses are becoming increasingly common in employment contracts.
Ensure that contracts of employment contain restraint clauses with reasonable time and geographical locations. Consider what is reasonable to protect your genuine business interests. For example, it may not be reasonable to restrain an employee from competing with your business anywhere in Australia if you run a business that only services one regional area of New South Wales.
Employment contracts in Australia frequently include a restraint of trade clause. This is to protect business interests after an employee leaves. Most commonly, it’s applied in contracts with senior professionals as well as in agreements for the sale of business. You can enforce a restraint clause to the extent that it is ‘reasonably necessary’ to protect your legitimate business interests. An increasing number of health practitioners are seeking our assistance regarding the validity of restraint of trade clauses included in their employment contracts.
Unfortunately, our assistance is often sought under circumstances where the clause has already been breached by the health practitioner. Restrained business” was defined as a business or operation similar to or competing with the business of HRX. When considering a clause, the could will balance the employer’s legitimate and reasonable business interests with the employee’s rights to engage freely in trade or employment. Instant Downloa Mail Paper Copy or Hard Copy Delivery, Start and Order Now!
Australian employers often use restraint of trade clauses to protect their business interests after an employee leaves their company. Cascading restraint clauses can operate by providing for multiple options in relation to distance, geography, time periods and the nature and type of conduct to be restricted. Many employment contracts with post-employment restraints refer to a “Restraint Period” and “Restraint Area”.
Often, the post-employment restraint will have cascading Restraint Periods and Restraint Areas i. A restraint will only be reasonable if it satisfies two tests. Firstly, the restraint must be reasonable in relation to the interests of the employer and employee, in that it must seek to protect a legitimate interest of the employer. The CFO had worked in finance at a senior level in various industries, including apparel retail, although some considerable time prior to the events. While the Victorian Supreme Court of Appeal demonstrated that restraint of trade clauses in employment contracts are generally construed in favour of employees, it also illustrated how the factual matrix of a particular case will be considered. The effect of these clauses will depend on how they are worded.
Where such clauses exist, they generally apply during the course of employment. One of the best ways that an employer can secure company information from employee theft is by having a robust employment contract that prohibits its misuse. At a minimum, employers should ensure that their employment contracts contain clauses in relation to confidentiality, intellectual property, restraint of trade and gardening leave. Examples of restraints commonly found in employment contracts include: Confidentiality clauses.
In addition, there is case law in Australia that suggests that, if an employer is in breach of its obligations under its own employment agreement , which would justify an employee bringing that contract to an en that employer is unable to rely on the post- employment restraints. In these circumstances, consideration can be given to bringing the. Instea court cases set the law in this area. However, employment contract restraint of trade clauses can only operate where they don’t interfere with legislation, in particular the.
The validity of a restraint of trade depends on the facts of the specific clause (s) in question. A court begins with the assumption that a restraint of trade clause is unenforceable as a matter of public policy. Generally speaking, a restraint of trade clause refers to an instance where one party agrees with another party to restrict a person’s right to carry on their trade or profession. Failing to properly draft a restraint of trade clause can render the clauses void and unenforceable.
Restraint clauses should be limited to what is necessary to protect goodwill.