Employees are spending less and less time working in the same
organisation. As employees move around different organisations in
the same industry, businesses need to take necessary steps to
protect their commercial interests with confidentiality and
restraint clauses in employment contracts.
Restraints of trade can also be called non-competition or
non-solicitation clauses. They generally involve preventing
employees and contractors from competing with a business during and
after their employment.
WHY RESTRAINT OF TRADE CLAUSES ARE IMPORTANT
Many employees are privy to sensitive and confidential business
information. This includes client information, trade secrets and
intellectual property. A business's viability relies on its
ability to provide a unique service that generates revenue using
particular procedures and processes.
Protecting that knowledge and methodology is vital to protecting
your business's viability. Some of the things restraint of
trade clauses can help protect include:
Soliciting and poaching current and former clients and
Soliciting and poaching current and former employees,
contractors and other affiliates
Disclosure of trade secrets and other confidential
General activity that is in direct competition with the
business's services or products
ENFORCING RESTRAINT OF TRADE CLAUSES
The law surrounding restraints is complex. It should not be
assumed they are easy enforce, even when restraint clauses are
included in signed contracts. It's important to carefully frame
them in the contract in order for them to be effective. An
experienced workplace and employment lawyer can help you get it
right by providing advice and drafting your restraint of trade
Restraint of trade clauses will only be enforceable if they are
necessary to protect legitimate business interests. They cannot
restrict the liberty of someone to earn a living and exercise their
chosen trade any more than is strictly necessary to protect
legitimate interests. Whether a restraint of trade clause is
reasonable is determined by the facts of a particular case,
The size and nature of the industry
The nature of the employee's role
The extent to which the employee was in regular contact with
The extent to which the employee had access to the employers
commercial confidential information
The geographic scope and temporal length of the restraint
The effect of the restraint on the employee's ability to
earn a wage
Bargaining power of the contracting parties
Future probabilities that could have been foreseen by the
The effect on the employer's business without the
Most restraint of trade clauses are deemed unreasonable due to
their excessive scope, geographic reach and length. When drafting a
restraint of trade clause, these factors should be limited as much
as possible to the particular circumstances of the employee in
their employment role. Protecting legitimate business interests
with a restraint of trade clause does not extend to simply
preventing potential competition. It should specifically outline
what needs to be protected for the sustainability of a business,
whether it is client, employee or supplier connections or
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 employer's duty is very high and can include engaging experts to inspect things such as stairways for latent defects.
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