BlandsLaw - Blog posts from restraint clauses
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Protecting the goodwill of your business: Restraints of Trade

When an employee leaves their job, there is the potential for the employer’s confidential information, trade secrets, client lists and business know-how to become exposed. Employers spend significant time and money developing those assets and do not want to see them fall into the hands of their competitors. However, on the other side of the spectrum, employees have the right to change jobs, develop their career and earn a living. The question is: how do we strike a balance between these competing interests?

There are various types of clauses used in employment contracts to prevent employees from carrying on certain actives, either during or after their employment, which may infringe on their employer’s legitimate business interests. Typically, these clauses include:

  • Conflict of interest
  • Confidentiality obligations
  • Intellectual property
  • Restraint on competition with the employer’s business
  • Restraint on solicitation of the employer’s customers/suppliers etc
  • Restraint on poaching/recruitment of employees/contractors etc

These last three categories are referred to as “Restraint of Trade” clauses. The general position at law is that Restraint of Trade

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Protecting the goodwill of your business: Restraints of Trade

When an employee leaves their job, there is the potential for the employer’s confidential information, trade secrets, client lists and business know-how to become exposed. Employers spend significant time and money developing those assets and do not want to see them fall into the hands of their competitors. However, on the other side of the spectrum, employees have the right to change jobs, develop their career and earn a living. The question is: how do we strike a balance between these competing interests?

There are various types of clauses used in employment contracts to prevent employees from carrying on certain actives, either during or after their employment, which may infringe on their employer’s legitimate business interests. Typically, these clauses include:

  • Conflict of interest
  • Confidentiality obligations
  • Intellectual property
  • Restraint on competition with the employer’s business
  • Restraint on solicitation of the employer’s customers/suppliers etc
  • Restraint on poaching/recruitment of employees/contractors etc

These last three categories are referred to as “Restraint of Trade” clauses. The general position at law is that Restraint of Trade

Read more

Restraint of Trade: How far is too far?

Employers commonly use restraint of trade clauses in employment contracts to prevent their employees from jumping ship and working for a competitor when their employment ends. In doing so, employers are seeking to protect their business as well as their confidential information, trade secrets and customer, staff and supplier connections. Seems reasonable doesn’t it?

While confidentiality and non-solicitation clauses are generally found to be reasonable and enforceable,the challenge for employers is to ensure their restraint of trade clauses are not struck out for going beyond what is necessary to protect their legitimate business interests.

In a recent case before the Victorian Supreme Court[1], Just Group Ltd (JGL), a retailer company which includes Just Jeans, Peter Alexander and Portman’s, alleged their CFO, who was employed with them for just 6 months, breached her restraint of trade and confidentiality clauses when she accepted a job offer from rival Cotton On. Justice McDonald concluded that the restraints were too broad and went beyond what was reasonable to protect the company’s legitimate

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Social media is an emerging and dynamic phenomenon, and consequently social media law is continually being revised. At its intersection with employment law, there are a number of undecided issues including those around non-solicitation, and the use of social media accounts and contacts post-termination. What happens if an employee uses their LinkedIn account to seek business, and sends an ‘invitation’ to all their contacts including their former employer’s clients?

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As we get into 2011, we encourage employers to review and consider their obligations, employment terms and conditions, policies, procedures and practices to ensure an industrially successful 2011 ahead. We have highlighted some recent developments and upcoming matters for consideration in the workplace. To read the full article, click on the following; Looking Forward - 2011 the year ahed

When is Restraint Unreasonable?

Recently the Federal Court considered a case in which an Australia-wide 2 year restraint period for a former director and founder of an HR outsourcing business was upheld and considered to be reasonable in the circumstances.

The case reinforces the importance of employers including well-drafted restraint clauses in their employment contracts to protect their business in the event that an employee with important company or business knowledge and contacts is not able to unfairly compete with the employer when leaving the company.

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