Often, after the separation of employment both employees and employers are concerned about whether or not restraints will apply to the former employee as part of their post-employment obligations to their former employer.
In New South Wales a restraint is valid to the extent to which it is not against public policy bearing in mind an employer is not entitled to be protected against mere competition but is protecting its legitimate interests by enforcing the restraints. Such interests may include employer’s trade secrets, confidential information, the employer’s goodwill, including its connections with its customers.
It is also worth noting that there are statutory obligations under the Corporations Act that an employee cannot use information obtained to gain advantage for themselves or for someone else which may cause detriment to a corporation.
A Court when determining a restraint period, gives considerable weight towards enforceability when the parties have entered into a restraint agreement. Such a restraint agreement can be properly documented in an employment contract.
There are also recognised obligations of loyalty that an employee owes to an employer that do not cease on the termination of employment.
Restraints are important to ensure that the interests of the employer are protected. A clearly defined restraint agreement sets out both the geographic area as well as the time that the parties agree is reasonable to protect the employer’s commercial interests.
The enforceability of the length and area of restraints are unique to a particular business and take into account the background of the separation of employment. For example, for a Court a relevant fact when considering a restraint would be if the employee was made redundant as it goes to the reasonableness of the restraints in the circumstances.
It is important for employers to protect their commercial interests including but not limited to, any intellectual property that is created by staff during their time of employment.
A clearly defined restraint provisions within an employment contract shows the intention of the parties and goes towards securing an employer’s position.
At Everingham Solomons Solicitors we have the expertise to provide advice in relation to drafting employment contracts focusing on restraints placed upon employees to protect the employer’s rights because Helping You is Our Business.
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