Which case won?

The case for the ex-employee
  • At the time we negotiated the second employment contract, the company knew that I wanted to leave to set up my own business selling school uniforms in competition.
  • The company knew that due to my years of employment in the industry, I had very substantial knowledge of the school uniform market in NSW, as well as information which the company now says is confidential.
  • Given this knowledge, the general manager was aware of the amount of protection the company would need and was at liberty to bargain accordingly.
  • My family and I would suffer extreme financial hardship if I was prevented from working altogether by a restraint order.
  • I am prepared to submit to orders not to disclose or use trade secrets or any confidential information of the company.
The case for the company
  • It beggars belief that the ex-employee thought she was entitled to take our DST files and other confidential information to use in her own business. She has contractual and general law obligations to the company of good faith and fidelity.
  • The second employment contract is void or voidable because it was entered into in bad faith, or by misrepresentation or misleading and deceptive conduct, as the ex-employee had already begun to set up her business without our knowledge before the second contract was negotiated.
  • A restraint against competition clause is justified because it is the only realistic way to protect the company from abuse of its confidential information – a legitimate proprietary interest.
  • The ex-employee should be restrained because she was at fault in setting up her own business while still employed by the company.

So, which case won?

Cast your judgment below to find out
Case A Case B

Case A won. You were right!

How people voted
case a29%
case b71%

Expert commentary on the court's decision

“Restraint of trade must go no further than what is necessary for the protection of the legitimate interests of the employer. Legitimate interests include interests of a proprietary nature, including confidential information and customer goodwill.”
Restraint of trade must go no further than necessary to protect employer’s interests

In the case Georges Apparel Pty Ltd v Giardina [2017] NSWSC 290, the court decided not to grant the restraint of trade order requested by the company, Georges Apparel.

It is relevant that restraint of trade clauses are presumed invalid as contrary to public policy, unless the company can prove that it is reasonable having regard to the interests of the parties and the public interest in free and competitive markets.

Restraint of trade must go no further than what is necessary for the protection of the legitimate interests of the employer. Legitimate interests include interests of a proprietary nature, including confidential information and customer goodwill.

In this case, the court found that there was no link between the conduct of the ex-employee, Ms Giardina, in starting her business before leaving the company, and the company’s entry into the post-employment agreement which would make the agreement voidable.

Protecting company’s interests does not require absolute prohibition of competition

The court took the view that the protection of Georges Apparel’s legitimate interests did not require an absolute prohibition on Ms Giardina working in competition with the company. It was sufficient to enforce the post-employment obligations agreement, and allow the company to assess what confidential information Ms Giardina had in her possession.

Rather than acceding to the argument that Ms Giardina should be restrained from competing against the company altogether, the court ordered that she submit all of her computers, tablets, mobile phones and electronic storage devices to an independent expert for an objective assessment of what, if any, confidential information belonging to Georges Apparel was in her possession.

The court determined that this course of action reflected the appropriate balance between the interest in protecting the company’s business and protecting Ms Giardina’s interests.

Finally, the court noted that there is also a public interest in Ms Giardina continuing to make her skills available in trade and commerce, even if this is not a crucial consideration where her skills and services are not unique or uniquely valuable.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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