Employment agreements that contain restraint provisions against
staff are often unenforceable. If the restraint is too broad or too
long, or both, it will be regarded as contrary to public policy.
However, a restraint is likely to be upheld if found reasonable to
protect a legitimate interest of the employer.
In a recent decision of the Supreme Court of New South Wales
(Helensburgh Property Management Pty Ltd v Brady 
NSWSC 1861) the owner of a real estate agency successfully had a
post-employment restraint against a former employee upheld.
In this case, the employer, Helensburgh Property Management Pty
Ltd, was successful in establishing that the employee, Ms Emma
Brady, had breached the terms of her employment contract with the
employer, by setting up a business in competition, poaching clients
and misusing confidential information while still employed for the
The employee had established a company All Over Rentals Pty Ltd
(All Over Rentals), operating in the same area as
the employer's agency and competing with the employer in the
management of rental properties. The employee admitted to enticing
25 of the employer's clients away from the agency to All Over
Rentals both before and after the termination of her agreement.
Importantly, Justice Bergin was satisfied the post-employment
restraint of 6 months and a 15 kilometre radius from the
employer's agency was reasonable in all the circumstances and
not against public policy.
In the later damages proceedings (Helensburgh Property
Management Pty Ltd v Brady  NSWSC 253) Justice Bergin
rejected the plaintiff's argument that damages should be
awarded for the capital value of the lost clients. In particular,
evidence adduced by the former employee and statements of the lost
clients found that the clients would have left after 6 months
irrespective of the employee's breach of the Contract.
Accordingly, damages were assessed on the basis of the loss of
commissions of the properties during the restraint period in the
amount of $33,740. We fear the plaintiff agent's unrecoverable
legal costs would have exceeded this sum.
This decision highlights the importance for employers to have a
reasonable restraint clause integrated into their employment
agreements. Where a restraint is imposed on an employee, it is
critical the wording of that restraint is clear to ensure the
employee understands the limitations under which they must work and
conduct themselves post-termination. There is no point having a
term in an employment agreement in place if you cannot enforce it
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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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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