Employment Restraint Clauses
Your customers and your data are usually the most valuable part of your business. So how do you stop your team from poaching your customers, stealing your data and/or competing with your business?
In this video, our Director, Alex Martin, discuss employment restraints and how you should not go unprotected.
If you would like to discuss a specific employment concern in your business, please contact one of our experienced employment lawyers at Taurus Legal Management on (03) 9481 2000 or at firstname.lastname@example.org.
Your customers and your data are usually the most valuable part of your business.
Hi everyone. Today, I’m going to talk about non-competition clauses or restraint clauses. They’re clauses in employment contracts that restrain someone’s ability to compete with a business. And I commonly get asked, are they enforceable or aren’t they? I’m going to give you the lawyer answer, which is it depends. And I’ll go through the factors that it depends on now.
Hi, I’m Alex Martin. I’m a commercial litigation specialist and these are my No Bull Legal Tip for Business Owners. Okay. So is a non-competition clause enforceable? The answer is a technical answer, which is it is if it’s reasonably necessary to protect the legitimate business interests of the business. What does all that mean? It really means it’s enforceable as long as it doesn’t go too far. So something that might be going too far is restricting employees from competing generally. If a restraint restricts employees from approaching say particular customers or other employees from poaching, if you like, it’s much more likely to be enforceable than if it’s just a general restraint against competition generally and particularly if it’s a restraint that lasts for a long time.
So a short restraint that only relates to particular customers or particular employees is much more likely to be enforceable. A general restraint may be enforceable if an employee is being bought out. So if they’re an owner of a business, then the court is likely to protect the purchase of good will. But if you’re a regular employee, then a restraint is unlikely to be enforceable if it is general in nature. The general principle is that employees should be able to use their skills and earn a living, and they should be able to approach whatever customers they like. That general right will only be restricted where the court can be shown that it’s reasonable and that the restriction is warranted in the particular circumstances. So I know that’s a bit of a legal answer. If you’ve got particular questions about a particular restraint, please message me directly.
We certainly get a lot of questions about, “I want to hire this employee, but they’re restrained from acting in my industry. Is the restraint enforceable? Is it not?” There is clear answers, but they do depend on the circumstances. So message me with your particular answers. Thanks for listening.