As industries become more competitive and employees increasingly switch between employers and 'job hop', restraint of trade and non-solicitation clauses are progressively further incorporated into employment contracts. This blog touches briefly on restraint of trade clauses and takes a closer look at non-solicitation clauses. In particular, we look at two decisions where the Court determined the employment contract had been breached regarding departing employees' use of social media.
Restraint of trade clauses in employment contracts
Restraint of trade clauses are typically drafted to, for example:
Restrain an employee, in a relevant area and for a relevant time from the date of termination of their employment in being employed or involved in any business or services similar to those the employee provided to their previous employer.
These clauses can often be verbose and longwinded which, in turn, often lead them to be non-effective by being too broad or failing to even protect the very thing they were designed to do. For information about restraint of trade clauses and whether a restraint of trade clause could be enforceable, see our blog "Is a Restraint of Trade clause in my employment contract fully enforceable?"
Obtaining legal advice from an employment lawyer, about restraint of trade clauses can be important for both employees and employers. As referenced in the above-mentioned blog, at a starting point restraint of trade clauses are assumed unenforceable as a matter of public policy. This was determined in the High Court case of Buckley v Tutty (1971) 125 CLR 353 at 380 on the basis that people should be entitled to use their skills and trade.
These clauses are also continually being tested in the Courts, with the recent decision of United Petroleum Pty Ltd v Barrie [2022] FCA 818 finding that a restraint of trade clause was not enforceable against an exiting employee.
Non-solicitation clauses in employment contracts
Non-solicitation clauses are commonly included in contracts and put very simply, are designed to protect an employer's clients and staff when an employee leaves the business, by preventing the exiting employee from soliciting those individual customers after their departure.
They are often drafted to, for example:
Prevent solicitation, persuasion, inducement or acceptance of any customer or client of the Employer with whom the previous Employee had work-related dealings during or preceding the termination of the Employees employment to cease doing business with their previous employer or reduce the amount of business which the person would normally do with the Business.
Using social media to announce your new job could breach your employment contract
We are often approached by employees who are about to, or have just commenced a new job and would like to update their job title on social media platforms, such as LinkedIn or Facebook. They are conscious, however, that they are still bound by post-employment covenants or restrictions stemming from their previous employment relationship, such as a restraint of trade and/or non-solicitation clause.
In such circumstances, we are increasingly asked whether updating their job title could inadvertently cause a breach of a non-solicitation clause in their contract if a former client or even prospective client of their former employer contacts them.
Consider this scenario
- You have left your old employer and updated your social media profiles, such as Facebook or LinkedIn, publishing that you have commenced at a new employer; and
- A former client of yours or the business sends you a direct message or contacts you and wants to engage your services.
Will you be in breach of your non-solicitation clause in your former employment contract if you respond to the message?
The common answer by the employee posting their new job status is:
"No, how can I be. They approached me. They gave the invitation. I only responded!"
Wrong answer
That response is unfortunately incorrect and does not properly comprehend non-solicitation clauses.
Strictly speaking, the communication that follows in the above scenario could lead to a breach of any applicable non-solicitation clause relating to former clients.
Court finds employment contract breached in Barrett and Ors v Ecco Personnel Pty Limited
A similar scenario occurred in the case of Barrett and Ors v Ecco Personnel Pty Limited Matter No Ca 40586/96 [1998] NSWSC 545 when a client of Ecco Personnel, being Nestle, approached Mr Barrett after he had left Ecco Personnel in order to enquire about his services. Although it was the ex-client, Nestle that made the initial approach, the Court found that Mr Barrett was in breach of a non-solicitation clause in his Ecco Personnel employment contract. Why was that?
The Court's decision
The Court held the following on appeal:
"The task of the court is to interpret the words in the contract of employment in their context.
"...`solicit' was a common English word, and in its simplified form meant `to ask'. Its other meanings included:
- `to call for'
- `to make request',
- `to petition',
- `to entreat',
- `to persuade'.
"...I cannot see that to propose to do business ceases to be soliciting business simply because the recipient invited the proposal."
It seems to me that Young J was saying that the approach by Nestlé merely provided the window of opportunity for the first appellant to submit a proposal more attractive to Nestlé than its current contract with the respondent. That the approach was the catalyst or trigger for the solicitation by the appellant does not make the appellant any less the mover for the action happening.
It is not appropriate to construe `solicit' in a mechanistic fashion. In most instances the first approach will be made by an ex-employee to the former customer, however common sense demands that this is the not the exclusive means by which solicitation may occur. That the approach by the client was the catalyst or trigger for the solicitation by the appellant any less the mover for the action happening.
The Court of Appeal was clear that although Nestle's invitation was the 'catalyst or trigger for the solicitation by the appellant (Mr Barrett)', that this did not 'make the appellant (Mr Barrett) any less the mover for the action happening.'
As a result, it was found that Mr Barrett had solicited the business of Nestle by submitting his proposal to them, despite not having made the initial contact.
As such, it is pivotal that you obtain legal advice before having such conversations with a previous client or staff member of your previous employer in such circumstances.
Court finds employment contract breached in Planet Fitness Pty Ltd v Brooke Dunlop & Ors
The case of Planet Fitness Pty Ltd v Brooke Dunlop & Ors [2021] NSWSC 1425 involved a much more brazen communication style by an ex-employee to previous clients.
Ms Brooke Dunlop, a personal trainer, had a non-solicitation clause in her employment contract preventing Ms Brooke from directly or indirectly soliciting, canvassing or securing the custom of any client. After leaving her employment with Planet Fitness, Ms Brooke contacted a number of her previous clients and advertised on her Facebook account, discounted membership rates for people she had previously trained.
Some of her Facebook posts included:
"I have negotiated an amazing deal exclusively for any of my PT [personal training] clients, PC members and Class participants. Please call Sean and the guys at GENESIS Warnersba [sic] NOW ... All you need to do is mention my name and show your current membership tag ..."
Planet Fitness, her previous employer, filed interlocutory proceedings in order to enforce the restraint of trade and non-solicitation clause.
The Court agreed that it was clear Ms Dunlop had solicited, canvased or enticed former clients. In analysing the clause in the employment contract, the Court held that:
'... as a whole, the clause is a restraint against endeavouring to attract, or achieving the attraction of, custom of the former clients of the first defendant, after her contract with the plaintiff had been terminated.'
There is a strong prima facie case that the first defendant has solicited or canvassed persons for whom she provided personal training services when she was contracted to the plaintiff. She did so by posting messages on her Facebook page in which, amongst other things, she advised her Facebook friends that, first, she was in negotiation, and later that she had negotiated arrangements, with Genesis (that is, the second and third defendants), whereby those persons would be able to train at Genesis clubs at a reduced rate for the remaining periods of their contracts with the plaintiff.
The Court's decision
The Court made orders:
- prohibiting Ms Dunlop from posting further messages on social media;
- requiring removal of relevant Facebook posts; and
- preventing further attempts to solicit, canvass or secure the customs of persons who were clients of Planet Fitness in the relevant periods.
The Court, however, found that Ms Dunlop was not restrained from providing services to former clients who 'of his or her own volition wished to continue to use the first defendant as his or her personal trainer'.
The Court did not make any orders preventing Ms Dunlop from providing services to her former clients. The Court relevantly stated:
I do not think that that is the proper construction of clause 3.5. I agree with the submission of counsel for the second and third defendants that the words "solicit, canvas or secure the custom of" have to be read as a whole phrase and that each word in it gives sense to what is restrained. I agree that, considered as a whole, the clause is a restraint against endeavouring to attract, or achieving the attraction of, custom of the former clients of the first defendant, after her contract with the plaintiff had been terminated.
A clause which was intended simply to restrain the first defendant from providing services to former clients would need to be clearly so expressed. Different questions might then arise as to the enforceability of such a clause. I think the clause is one directed against soliciting and was not intended to deal, for example, with the case where a former client of his or her own volition wished to continue to use the first defendant as his or her personal trainer.
Get help
Often, restraint of trade and non-solicitation clauses are drafted without the necessary precision to accurately reflect the intention of the enforcer. The cases reviewed above, demonstrate the importance of:
- properly drafting a restraint and non-solicitation clause; and
- obtaining legal advice about its construction and effect;
If you require advice or assistance related to any aspects of your employment contract, our award-winning employment law team can assist.
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.
