Restraint of trade

Restraint of trade clauses are commonly found in employment contracts. Restraint of trade clauses attempt to regulate an employee's conduct while still engaged in the employment relationship and to restrict a former employee's conduct once the employment relationship has ended. These clauses are intended to protect the employer’s business interests. If you are negotiating a new employment contract or if you need legal advice regarding your current contract, Maurice Blackburn are the nationally acknowledged employment law experts.

Employment contracts may be created orally, in writing, or be partly oral and partly written. Employment contracts can also include terms found in other documents, including policies, awards, agreements, and job descriptions. Maurice Blackburn are the experts in employment law and can advise you on all your employment contract rights and obligations.

Signing a new employment contract

Before signing your employment agreement you should make sure that you read and understand the agreement, particularly any restraint of trade clauses. A restraint of trade clause that is upheld may have consequences for your future employment or your ability to start your own business. Maurice Blackburn’s employment contract solicitors have experience in advising clients about the reasonableness and enforceability of such clauses and restrictions, and are ideally placed to assist in contract negotiations.

If you need legal advice or assistance regarding the terms of your employment contract, talk to us today about how we can help.

Is your restraint of trade clause enforceable?

Maurice Blackburn are the experts in employment contract law and restraint of trade matters. In broad terms, restraint of trade clauses are enforceable to the extent “reasonably necessary” to protect the “legitimate business interests” of the employer. The law will, for example, protect your employer’s trade secrets, confidential information, customer connections and staff relationships. However, for example, an employer can’t protect itself against simple competition from former employees. Which means that you are entitled to use any expertise acquired in the service of your former employer in legitimate competition.

It’s worth getting legal advice when negotiating the terms of an employment contract, because restraint of trade provisions can have serious consequences for your future employment and business opportunities.

Talk to Maurice Blackburn today about your employment contract.


Hanna v OAMPS

Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267

This case is an example of a cascading restraint of contract clause where the employment contract contained a number of separate restraints which served to extend the restraint period. The company sought to rely on a 15 month restraint clause where Hanna successfully argued a 12 month period was sufficient. 

Ross and Anor v IECTV

Ross and Anor v ICETV [2010] NSWCA 272

In a 2010 court decision, a clause which restrained two senior employees (a Chief Executive and Chief Technology Officer) from competing with the employer's business or soliciting clients for 12 months after their employment ended was deemed valid.

The employees were ordered to pay damages for the loss suffered by the Company flowing from their breach of the restraint of trade clause.

Fishlock v The Campaign Palace

Fishlock v The Campaign Palace Pty Ltd [2013] NSWSC 531

Mr Fishlock was the executive creative director of the Campaign Palace where he was responsible for management of creative staff and productivity and management of Sydney and Melbourne creativity divisions of the company.

Mr Fishlock had been working in this role for eight years when he was informed by the employer by email that his responsibilities would be significantly cut, including a loss of overseeing the Sydney and Melbourne divisions.

He brought a claim for damages on the grounds that the employer had repudiated his employment contract. He also sought a declaration from the Court that the restraint of trade clauses in his employment contract were invalid and unenforceable.

The NSW Supreme Court found that the employer had repudiated Mr Fishlock’s employment contract, and as a result, the employer was not entitled enforce the restraint of trade provision in the employment contract.

Mr Fishlock received $268,259.00 in damages in relation to the employer’s repudiation.

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