In Australia, post-employment restraints are often included in employment contracts.
They are intended to prevent former employees from competing with their former employer, soliciting their former employer’s clients or employees or misusing confidential information of their former employer.
However, these types of restraints can only legally valid and enforceable if they are reasonable and necessary to protect the employer’s legitimate interests.
But what are the key considerations when assessing the validity of a post-employment restraint in Australia?
➡ DURATION: The restraint should not be longer than is reasonably necessary to protect the employer’s interests.
The appropriate duration will depend on the nature of the business and the employee’s role.
➡ SCOPE: The restraint should be limited to the specific activities that the employee was involved in or had knowledge of during their employment.
The restraint should not be so broad as to prevent the employee from working in their chosen field or industry.
➡ GEOGRAPHIC AREA: The restraint should be limited to the areas where the employer has a legitimate interest in protecting its business.
The appropriate geographic scope will depend on the nature of the business and the employee’s role.
➡ LEGITIMATE INTEREST: The restraint must be necessary to protect the employer’s legitimate business interests, such as trade secrets, confidential information, or customer goodwill.
➡ REASONABLENESS: The restraint must be reasonable in all the circumstances.
Factors such as the employee’s seniority, access to confidential information, prior relationships with the employer’s clients or customers and the impact on the employee’s ability to earn a living will be taken into account.
➡ PUBLIC INTEREST: The restraint must not be contrary to the public interest.
For example, a restraint that prevents a doctor from practicing medicine in a certain area may be contrary to the public interest if it results in a shortage of medical services in that area.
Overall, the validity of a post-employment restraint will depend on the specific facts of the case and how the restraint is drafted.
What should employers do? Seek legal advice from an experienced employment lawyer to ensure that your post-employment restraints are valid and enforceable.
What should employees do? Don’t assume those post-employment restraints in your contract of employment are either enforceable or unenforceable. Seek legal advice.
