In a recent case before the New South Wales Supreme Court, an
employer has been successful in securing an injunction against an
employee. The employee has been restrained from departing from his
contractual obligations until 11 September 2016.
The employee, Mr Hickey, was employed by BCG Partners
(Australia) Pty Ltd (BCG) on 1 April 2006 for an
initial period of three years. The employment contract was extended
with effect on 1 August 2011, the initial period was extended
for a period of five years (that is, until 31 July 2016)
with effect on 1 September 2013, the initial period was
extended for a further two years to 31 July 2018
The contract provided that either party could give notice to the
other in writing to terminate the contract within the last two
weeks of the initial period and the employment would subsequently
end three months after the expiration date.
In the beginning of November 2015, Mr Hickey was offered
employment with a competitor of BCG and resigned from his
employment, providing only one months' notice.
BCG subsequently commenced proceedings against Mr Hickey.
The Court held that the contract remained on foot and ordered
that Mr Hickey be restrained from departing from his contractual
obligations under 11 September 2016.
Whilst the Court acknowledged that it could order that the
contract continue until 31 July 2018, given that the "actual
employment" was over the period was shortened to September
the proper construction of the contract was that the parties
could only terminate in certain circumstances – if it was an
implied term that either party could terminate at any point by
giving reasonable notice then there would have been no need to
include express notice provisions
the test was whether a "reasonable businessperson" in
the circumstances would understand the limited nature of the
termination clauses – the answer to this was yes
the restraint in the contract was reasonably necessary to
protect BCG's legitimate business interest – as such, the
Court decided to grant the injunction for no longer than what was
reasonably necessary for the protection of BCG's interests
(i.e. time to recruit, promote junior employees, transition
Lessons for Employers
The decision in this case shows that the courts are willing to
remedy a breach of contract by employees and uphold a reasonable
restraint. If drafted carefully, employers can use termination
clauses and restraints as an effective tool for protecting the
interests of the business.
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.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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