"Restraint of trade" clause specialists
Uncertain about a "restraint of trade" clause in your employment contract? Let the employment law specialists at Stacks Law Firm answer any questions you may have.
Employers want to protect their businesses in any way they can. One way to ensure that they don’t lose valuable workplace secrets or clients is to include "restraint of trade" clauses in their staff employment contracts.
The idea is that an employee or partner is prevented from leaving the business and immediately setting up their own rival business or joining a rival company and taking valuable clients with them.
But despite having a "restraint of trade" clause in your contract, your employer may or may not be able to enforce it in court. It has often been the case that the courts will not impose a restraint on an employee’s ability to earn money and support themselves.
But every matter is different and it will depend whether there are any special circumstances that make the restraint of trade necessary. It is a complex area of employment law.
A Stacks employment lawyer will be able to look closely at your contract and advise you about your particular situation regarding any restraint of trade clauses and their effect on your future work prospects. We can also help you to negotiate fair terms when you first sign your employment contract and, if necessary, act on your behalf to resolve legal disputes.
When will a court enforce a “restraint of trade’” clause?
A typical restraint of trade clause might stipulate that a former employee not work in a similar business within a particular geographical area, for a certain amount of time after leaving their position.
But to be enforceable, the restraint of trade clause must be deemed "reasonable". For example, an employer who attempts to restrain an employee for an unreasonable period of time, such as for several years, will be less likely to succeed in enforcing the restraint. An employer who tries to restrain an employee from working in the same industry anywhere in the world may be unsuccessful, but if the geographic area is more reasonable, then it may have a chance of being enforced.
A court may be prepared to "read down" the clause, meaning that they change it to make it more reasonable, and then enforce the new terms.
It is important to remember that every situation is unique and you should seek advice about your particular circumstances.
Factors the courts may take into account:
- How long the employee has worked for the business; how strong their relationships are with important clients; and how damaging it will be to the business if they depart for a rival business
- The wording of the clause - whether it is clear or ambiguous and therefore open to misinterpretation
- Whether or not the nature of the business that the employee is looking to work for or start up, is identical to or slightly different from the business they have left
Need to speak to an lawyer about a restraint of trade matter? Call us today
