Employment

Understanding Restraint of Trade for Employers

Restraint of Trade

Restraints of trade are a complex and high-risk area of law. The wording of a restraint of trade clause can make or break a business or a career. The importance of getting it right cannot be overstated.

Restraints of trade have many potential forms. The most common restraints are:

non-compete restraints - restricting employees from being involved in competing businesses; and
non-solicit restraints – preventing employees from poaching customers, suppliers or colleagues.

The interests of an employer and employee are usually directly opposed. On one hand, employees may seek the lowest level of restraint possible so that their future conduct is relatively unconstrained. On the other hand, employers usually want restraints to be as robust as possible to help safeguard the commercial interests of the business.

If a dispute arises regarding a restraint, immediate and decisive action is often required. Failure to take strategic and lawfully prudent steps can undermine your legal position. So, proactive advice should be obtained wherever possible.

Approach

When preparing restraints, we:

discuss your intentions and objectives;
provide you with our proposed wording; and
advise you on the scope of the restraints.

When managing restraint disputes, we:

provide you with a clear and transparent quote;
gather information and background context;
discuss your key objectives for the dispute;
provide support so that you can take prompt and decisive action; and
strategically manage the dispute for you, and adapt if necessary.

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Are all restraints enforcable?

The starting point is a presumption that restraints are not enforceable. However, Courts have expressed willingness to enforce restraints where they are reasonable and go no further than what is required to protect legitimate commercial interests. This is a notoriously complex and rapidly evolving area of law. So, you should seek advice if you have any questions regarding restraints.

Why are there multiple options listed in the definition of the restraint period? For example, (a) 12 months, (b) 6 months, and (c) 1 month.

This is known as a 'cascading clause' or 'ladder clause'. These clauses need to be drafted carefully, as defects in drafting can cause unintended consequences. A well drafted clause of this nature will result in the maximum legally enforceable option from the list applying.

How do you charge?

Trust is one of our core values. We pride ourselves on not causing 'bill shock'. Our usual approach is to provide you with a clear and transparent fee quote to ensure that there are no surprises. You can then make an informed decision about whether you want to proceed or not.

Can you help me with employment contracts?

Yes, we can. We regularly assist our clients to prepare and negotiate employment contracts of all shapes and sizes (including executive employment contracts). We can also assist with independent contractor agreements.