Australian retail giant Just Group Ltd (JGL) is
licking its wounds after the Supreme Court of Victoria refused to
enforce the broad restraint of trade contained in the employment
contract of a former Chief Financial Officer
Just Group Limited v Nicole Peck  VSC 614, which
for employersbrings to bear the difficulties faced in protecting
confidential information, may prompt businesses to rethink their
current employees' restraint clauses.
The gist of the case
JGL is the owner of several popular Australian apparel brands,
including Jay Jays and Just Jeans.
On 7 December 2015, Ms Peck signed a contract of employment with
JGL (Contract) and commenced as CFO. The Contract
contained an extensive restraint of trade that prevented Ms Peck
from engaging in a broad range of activities, with a large number
of businesses, for an extended period of time.
In or around April 2016, Ms Peck began negotiating a move to
Cotton On Group Services Pty Ltd, one of JGL's major
competitors; resigning from JGL on 2 May 2016. In response, JGL
sought to prevent Ms Peck from commencing work with Cotton On, for
a period of two years.
Restraints of trade – the law
A contractual restraint of trade is presumed to be void and
unenforceable, unless the party relying on the restraint
demonstrates that it is reasonable, by reference to the interests
of the parties. To be "reasonable", a restraint must not
confer greater protection than can be justified, taking into
account the special circumstances of each particular case.
The restraint of trade in Ms Peck's Contract contained two
The first prevented Ms Peck from engaging in any activity that
was "the same as, or similar to" any part of the
specialty brand and fashion business of JGL. In effect, this broad
restraint saw Ms Peck prevented from obtaining employment with
businesses to which the confidential information she had obtained
as CFO of JGL (Confidential Information) would be
The second limb prevented Ms Peck from engaging in any activity
with the 50 brands expressly listed in the Contract as competitors
of JGL. Although this second limb was narrower in scope than the
first, the Court held that Confidential Information would not be
relevant to her employment with all of the listed competitors. As
such it was up to JGL to prove that the Confidential Information
would be relevant to Ms Peck's role with each and every
competitor listed in the Contract; JGL only adduced evidence in
relation to four of the listed brands.
The restraint period in the Contract was drafted as a cascading
or "waterfall" clause; operative for 24, 18 or 12 months.
The geographic region for the restraint was similarly drafted; to
apply in Australia & New Zealand; in just Australia; or in just
This increasingly common drafting technique may allow a Court to
enforce a narrower restraint where the broader restraint is deemed
unreasonable. In this case, even the minimum restraint period of 12
months was held to be excessive. The Contract provided for a
probation period of 6 months, during which time JGL could terminate
with only a months' notice. The Court held that it was
unreasonable for Ms Peck to be restrained from working for a period
of 12 months, but to be entitled to one month's notice from
JGL argued that the restraints were reasonable because the
Contract was negotiated by Ms Peck, also relying on the clause in
which the parties acknowledged that the restraints were reasonable.
The Court rejected these submissions, clarifying that an express
contractual acknowledgement in a contract of employment negotiated
between parties is not determinative of whether restraints of trade
Take home message
Restraints of trade can be critical to the protection of
confidential information and trade secrets, especially when
employees with access to such information commence work for a
competitor. This case demonstrates that drafting a restraint of
trade is a delicate exercise: too narrow and the restraint may not
sufficiently protect the business's confidential information;
too broad and the restraint may not be enforceable.
Pointon Partners are able to assist in the preparation, review
or updating of employment contracts including restraint of trade
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