Some recent Court decisions in relation to the enforcement of
covenants restricting the activities of employees upon termination
of their employment demonstrate a willingness to enforce the terms
of reasonable post employment restraints.
Restrictive covenants are tools utilised by many employers in
employment agreements to regulate the conduct of employees, usually
after the termination of the employment agreement. The restrictions
predominantly relate to non-competition, non solicitation of
employees, suppliers and customers and use of confidential
information and intellectual property.
Up until the last couple of years, former employers experienced
difficulties enforcing restrictive covenants on employees post
separation, irrespective of whether the former employee had
resigned, been terminated or their position made redundant.
However, some recent high profile cases have demonstrated a
willingness for Courts to enforce the terms of post employment
restraints on ex-employees at least to the point where they will
ensure the protection of the legitimate interests of the former
In Seven Network (Operations) Limited & Ors v James
Warburton (No. 2)  NSWSC 386, the Supreme Court of NSW
granted an application by the Seven Network seeking to restrain its
former Chief of Sales from commencing new employment with the Ten
Network. The Court accepted that the Seven Network had legitimate
interests that should be protected by the restrictive covenants
under Mr Warburton's employment contract with the Seven
Network, but the Court did not apply the maximum restraint under
the terms of the employment contract.
For employers seeking to rely on restrictive covenants, there
are some important actions to undertake at different stages of the
Development of post employment restraints
When seeking to develop post employment restraints, an employer
Incorporate the key terms in an employment contract signed by
Ensure the terms of the restraints are designed to protect the
legitimate interests of the employer relevant to the departure of
that particular employee
Identify appropriate restraints, which can relate to employment
or other relationships with (or as) a competitor, soliciting other
employees to work with a competitor, soliciting suppliers or
customers to change their dealings with the employer and
unauthorised use or disclosure of the employer's confidential
information and intellectual property
Ensure the wording of the restraints are clear and provide for
cascading scoping provisions for time and geography of the
Generic restraints are best avoided. They should be worded to
recognise the importance of linking the scope of the restraint with
the role of the individual employee so as to preserve the
legitimate interests of the employer. For instance, it would
normally be expected that a process worker will have very different
restrictive covenants from a CEO.
In seeking to enforce a restraint, it is important to establish
the legitimate interests sought to be protected by the restraint
and identify the conduct of the exemployee likely to infringe those
Prior to the departure of an employee, it is prudent to re-visit
the terms of the restraints with the employee and, if possible,
provide written notification to the employee of the terms of any
restraints that the employer wishes to enforce post separation.
If there is potential for infringement of those restraints in an
employee's post employment activities, an employer can seek an
undertaking from the employee acknowledging the existence of the
restraints and agreeing to abide by their terms.
In the event that the employee refuses to provide undertakings,
the employer may have the right to commence Court proceedings to
enforce the restraints.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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