Want to Protect Your Business Interests?
Being an employer is no easy work. Running a business is no easy work. Managing people is no easy work.
Of course, as an employer your duty is to ensure your employee’s health, safety and welfare and provide to them a safe environment to do productive work.
You should trust your employees with their tasks and duties so that they advance your business – the same way your employees should trust you in managing them fairly.
But that doesn’t mean you should trust your employees completely to the point where you forget your own, legitimate, business interests.
Most employers nowadays have been increasingly inserting what’s called a Restraint of Trade clause into their Employment Contracts to protect their business interests.
What is a Restraint of Trade Clause
When you hire employees, they are required under the law to sign an Employment Contract.
A Restraint of Trade clause is simply a clause inserted into the contract and usually notes the following:
- That an employee cannot use your confidential information and trade secrets for their own benefit or another’s.
- That an employee cannot work for a competitor of your business for a period after they leave your business.
- That an employee cannot solicit clients, staff and customers from you.
Why would you want to insert a Restraint of Trade into your Employment Contract?
If and whenever an employee leaves your business, the Restraint of Trade clause will come into effect.
You may wish to enforce this clause to:
- Prevent any former employee(s) from competing against your business.
- Prevent any former employee(s) from actively soliciting your existing clients, staff and customers from leaving you and joining them.
What happens if you seek to enforce a Restraint of Trade?
Depending on your unique situation, the Court will consider the following factors if you decide to enforce a Restraint of Trade after an employee leaves your business:
- The negotiation process when negotiating the Restraint of Trade clause with your former employee.
- The bargaining position between you and your former employee at the time of executing the Restraint of Trade clause.
- The nature of your business and the characteristics of your former employee.
- Any remuneration or compensation paid to your former employee for the Restraint of Trade.
- The duration of the Restraint of Trade.
- The geographical restraint area.
Usually however, the Court does not put much weight on a Restraint of Trade unless it is has been prepared well by your solicitors at the time the contract was entered into.
As an employer, you have to persuade the Court that the Restraint of Trade clause is reasonable, and therefore valid and enforceable. It must also be noted that the time for assessing the reasonableness of a Restraint of Trade will be the date in which the clause was entered into.
It is therefore important that you consult with your solicitors first if you are considering inserting a Restraint of Trade clause into your Employment Contract, so that it is well prepared in the event you decide you need to enforce it.
Summing it all up
It is important to distinguish between a friendly relationship with your employees, and a professional relationship with your employees.
Deciding to insert and/or enforce a Restraint of Trade clause does not mean you don’t trust your employees, it simply means you are a business owner and are protecting your legitimate business interests as you should be doing.
T: 1300 287 911
JB & Associates Solicitors & Barristers