This month, BAL Lawyers Director, Ian Meagher spoke on the topic of Restraint of Trade.
In the context of the employer-employee relationship, a restraint of trade (a so called ‘non-compete clause’) is a legal contract that is used to stop an employee from conducting a similar business to their employer, stealing clients, or poaching ex-colleagues within either a specified geographical area, or for a specified time period (or both).
The topic of restraint of trade is an extremely complicated area of the law, full of traps and pitfalls for employers and HR managers.
Ian’s presentation focused on key topics within the area of restraint of trade, including common errors that he has witnessed which cause courts to find restraint clauses unenforceable and cause employers headaches, namely that:
- Restraints of trade are viewed with a degree of caution by the courts and employees love to test the boundaries of restraints.
- Courts are loathe to enforce widely-reaching restraints which may result in an employee not being able to find work. A restraint should go no further than what is reasonable to protect an employer’s confidential information, or their relationship with their customers.
- The biggest test on whether a restraint will be found to be reasonable by a court is the length of the restraint. A restraint must go on for no longer than it absolutely needs to, typically the timeframe for an employer to re-establish the relationship with their clients after the employee has left.
- If an employer has particularly sensitive, confidential information that it wants to protect, that information should be explicitly defined as confidential in the employment contract, instead of a general restraint that declares ‘all confidential information’ off-limits. This avoids future fights and arguments from ex-employees that ‘I didn’t know it was confidential’.
If you require any assistance with drafting an enforceable restraint of trade clause, please contact BAL Lawyers.