What is a restraint of trade?
Typically, a restraint is placed in an employment contract, or a shareholders agreement attempts to:
stop someone poaching clients and/or;
taking valuable information and/or;
working in competition or for a competitor.
it is therefore vital for any employee to read the contract before signing.
The typical clauses normally only apply to employees of a senior level or an employee who is vital to a business.
Any term in a contract is only enforceable when reasonable when looking at the specific contract and circumstances.
They can be introduced at a later point from employment if the parties agree.
They are a legitimate way of protecting your business and to stop someone destroying what you have worked for many years to create. To be balanced with that approach is the freedom of movement associated with an individual being able to start their own business or work where they want.
Depending on what side of the fence you are looking from will determine what you believe is objectively reasonable.
In NSW, the courts have the power to amend a clause to make it from the court’s perspective reasonable.
The Restraints of Trade Act 1976 governs the law surrounding restraints of trade in NSW. A court will consider a variety of factors in its determination of whether the restraint of trade clause is reasonable. Some of these factors include the:
Negotiation and whether parties were able to negotiate any terms.
Respective bargaining position of parties and whether parties were able to obtain legal advice.
Nature of the business and the characteristics of the role of the employee.
Remuneration and compensation for the restraint of trade.
Duration and geographical area of the restraint.
If you need some help in this area or you have a question, please call our office on 4243 7855 or email reception@culletonlawyers.com.au