On 1 March 2012, the Federal Court found that a contractual
clause restraining a HR director from competing or working in any
way in the business of HR outsourcing in Australia and HR
recruitment in Australia and New Zealand for two years after his
termination of his employment contract was reasonable. In HRX
Holdings Pty Ltd v Pearson  FCA 161, Justice Buchanan ordered
an injunction on the basis that he was not satisfied that Mr
Pearson was prepared to honour the restraints if an injunction was
Although the restraint clause contained in Mr Pearson's
contract was particularly broad in both restraint area and time
frame, the Court held that it was reasonable due to a number of
the consideration for the restraint and the value of that
the special skills and ability of Mr Pearson; and
the fact that the restraint clause had been negotiated by the
In relation to the consideration for the restraint, Mr
Pearson's employment contract provided that in the event of his
termination of his employment contract, the company would pay his
average monthly salary throughout the restraint period, except the
first 3 months of the restraint period, reduced by any alternative
income received by Mr Pearson, including proceeds from any sale of
his shares in the company.
Restraint provisions are notoriously tricky to draft and
enforce. This case illustrates that point.
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