In a recent interlocutory decision, the Federal Court
granted a temporary non-solicitation restraint despite the
employment contract being restraint free.
APT Technology, an engineering consultancy company, was quick to
act when it discovered that one of its employees had set up a
competing business and was stealing confidential information in the
process. After sacking the bloke, APT commenced proceedings to stop
him and his company from using the stolen info.
However, APT did not stop there. Not discouraged by the fact
that the former employee's employment contract did not contain
a restraint of trade clause, APT pressed forward, seeking to stop
the former employee from soliciting its clients.
While it has yet to reach final hearing, at the interlocutory
application, the Federal Court said that the evidence suggested
that the former employee was up to some pretty dodgy things
including actively deceiving APT during his employment by courting
its clients to his competing business.
The Court found that the former employee used his position at
APT and its confidential information to give his business a
head-start, including by securing the business of APT's
existing and former clients to APT's detriment (often referred
to as the 'springboard principle'). As a result, although
APT had no contractual post-employment restraint in its favour, the
Federal Court restrained the former employee and his business from
soliciting any of APT's clients until the final hearing.
Although a great decision for APT and other employers in similar
situations, life would have been much easier if the former employee
was subject to a reasonable contractual restraint of trade.
Accordingly, employers still need to make sure that their
employment contracts properly protect their business interests,
including through reasonable post-employment restraints. The
Federal Court would likely have been much more hesitant to restrain
APT's former employee if it were not for his demonstrable shady
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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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