Employment restraints are common in employment contracts and vital for employers in order protect their goodwill, client base and staff, based on the expenses incurred in building-up the business over numerous years.

Employment restraints generally restrain the employee from poaching staff, poaching clients, setting up a competing business and working for a competitor, both during and after the employment has ended.

The law prohibits unreasonable restraints. Unreasonable restraints are not enforceable unless they are reasonably necessary to protect the “legitimate interests” of the business, such as trade secrets, general confidential information and relationship with other employees or suppliers/clients.

When determining whether restraint clauses are reasonable, Courts will consider the negotiation process, the employer’s business and characteristics of the employee and the duration and geographical area of the restraint.

The reasonableness of the restraint is only considered at the date of entering into the employment contract. Therefore, it is important that the parties to the employment contract each have an opportunity to negotiate the terms of a restraint.

Having an enforceable and valid restraint of trade clause in an employment contract is vital if an employer seeks to rely on it to enforce a former employee’s post-employment obligations.

If you require any restraint of trade legal advice, or would like to have your employment contract reviewed, then call us for a no-obligation discussion to speak to our employment lawyers.

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