It is not uncommon for an employer to place a restraint upon a departing employee which typically prevents the departing employee from being involved in a similar enterprise, contacting the past employer’s customers, utilising the employer’s confidential information and not poaching the employer’s employees.
In brief the law is that an employer must have a “legitimate interest” to protect and the reach of the post employment restraint must go no further than is reasonably necessary to protect that interest.
The Courts start from the premise that restraints are void, due to public policy. That is because a person should have the right to practice in his/her chosen occupation trade or profession.
That is not to say that a restraint is not worth the paper it is written on. A carefully worded restraint which covers legitimate interests and is reasonable to protect that interest, is enforceable.
The employer has the onus of proving that the restraint is reasonable and the validity of the restraint is decided by reference to the circumstances that existed when the restraint was made.
What are “legitimate interests”. It is clear that a desire to simply restrict competition will be primarily void and contrary to public policy.
The recognised “legitimate interests” for employers include:
- Protecting customer connections;
- Protecting confidential information which is not in the public domain; and
- Restraining interference with the employers existing staff.
Once the appropriate interests are identified, then the area and duration of the restraint must be considered. A restraint which seeks to impose an unreasonably wide geographic area and long restraint will in all likelihood result in the whole clause being declared unenforceable.
Drafting, interpreting and enforcing restraints of trade is a complex area.
At Everingham Solomons we have the expertise and skills to assist you because Helping You is Our Business.
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