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Restraint of Trade Covenants (continued)

Negotiating post-employment restraints

The post-employment restraint in the contract of employment may say, for example, that within a period of 12 months from the date of termination of your agreement, you are prohibited from working with a competitive company located anywhere in the eastern seaboard of Australia.

You may be able to limit this clause to, say, four months in the State of New South Wales.

Impact on goodwill of business needs to be assessed on a case-by-case basis

Many employers will operate using a standard employment agreement which will include a post-employment restraint that all staff members agree to. This “cookie cutter” approach to contractual agreements ignores the fact that some staff members have greater exposure to clients/customers than others. In light of this, the impact on the goodwill of the business by the activities of a former employee needs to be assessed on a case-by-case basis.

Consider asking for additional remuneration to compensate for the inclusion of the restraint clause

If your prospective employer is adamant that they wish to remove you from the marketplace for a lengthy period of time, you should consider asking them to pay you for the privilege.

If a prospective employer is not prepared to either delete the clause, dilute its impact or pay you for remaining out of the marketplace, you need to give serious consideration to the implication of such a clause in your agreement.

The risk of legal proceedings when you may be considering a career change

One such implication is that you may be confronted with the prospects of legal proceedings initiated by your former employer against you should you wish to resign your employment and join another company. This is certainly a complication that you do not need at the time of a career change.

Even if your former employer commences proceedings against you and the court holds that the restraint is too wide to be enforceable, this will still involve your exposure to considerable legal costs not to mention the stress and anxiety of being embroiled in litigation. This is also not guaranteed to endear you to your former employer when it comes to providing references.

Post-employment restraint clauses can therefore be a ticking time bomb which should be dealt with upfront and not ignored for a future time.

 Restraint of Trade Convenants

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