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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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