Restraint of Trade

Restraint of trade clauses in employment contracts can be a useful tool to protect your business if a key person leaves your employment. Without a restraint of trade clause, an employer has virtually no grounds to prevent an employee from going to work for a competing business or from soliciting your clients or employees for a competing business.

A restraint of trade clause may be drafted to provide numerous different protections for an Employer. For example, a restraint may prevent:

  • an employee from working for a competitor or staring their own competing business;
  • an employee soliciting an employer’s clients;
  • an employee soliciting an employer’s contractors and employees;
  • an employee soliciting an employer’s referrers; and
  • an employee enlisting the help of a third party to do any of the above.

Common mistakes we see in relation to restraint of trade

  • Not having a properly drafted restraint of trade clause in an employment contract that has good prospects of being enforced by a court if required
  • Having a restraint of trade clause that goes further than to protect the employer’s reasonable business interest
  • Not having cascading provisions in the restraint of trade clause in jurisdictions where the court cannot rewrite the clause to make it reasonable to be enforced

Risks of getting it wrong

If you do not have a restraint of trade clause in your employment contracts, or it is poorly drafted, then you may have no recourse against an employee who goes to a competing business or tries to solicit your clients or employees. Without this protection you run the risk of that former employee doing significant damage to your business, including your bottom line.

How can we help you?

We regularly draft comprehensive and legally enforceable restraint of trade clauses which take into account recent developments in the case law. We also draft detailed confidential information and intellectual property clauses in employment contracts which provide further protection for your business.

If a former employee acts in breach of a restraint clause we can prepare a comprehensive letter informing them of the post-employment obligations, they are breaching and demand they cease and desist from the conduct they are engaging in or risk legal proceedings.

We are experienced in commencing legal proceedings to enforce restraints of trade clauses, including injunctive proceedings and seeking an account of profits.