By Simon Abraham

17 May 2017

Slavery was outlawed in the British Empire (including Australia) by 1833. The United States took a little longer but, even with a civil war to decide the question, slavery was outlawed there too by 1865.

What is the relevance of this to post employment restraints?

Post employment restraints, without proper limitations, seek to turn employees into modern day slaves – unable to pursue their career if they cease working for their current employer.

Courts justifiably refuse to enforce restraints of trade on the grounds of public policy. The Supreme Court and Court of Appeal recently took the opportunity to remind employers of the relevant principles in Just Group Ltd v Peck [2016] VSC 614 and [2016] VSCA 334.

Employers get one shot to put a valid and enforceable restraint in place. There need to be special circumstances that demonstrate the restraint is:

(a) reasonable as between the parties; and

(b) not unreasonable in the public interest.

The overall situation is relevant. Employment restraints are harder to enforce than, for instance, a restraint in a sale of business.

A restraint clause in favour of an employer will be reasonable as between the parties, if at the date of a contract the restraint clause is imposed to protect a legitimate interest of the employer and the restraint clause does no more than is reasonably necessary to protect that legitimate interest in its duration or extent.
It is well established that employers have a legitimate interest in protecting confidential information / trade secrets and customer connections. An employer may restrain an employee from being involved with a competing business that could use the confidential information.

The secret to drafting a valid restraint is for employers to have a tight and well defined restraint. In Just Group Ltd v Peck, the employer went too far. It listed 50 businesses that the employee was not to work for in any capacity after she left employment. The Court was not prepared to read down the restraint so as to make it enforceable as this was seen as rewriting an invalid restraint after the fact.

The Court of Appeal gave a stinging rebuke to the Just Group by citing a statement made by Justice Heydon some years earlier “The courts are referees, not players; they are not supposed to waste their time adapting illegal covenants at the instance of those who seek to benefit from the illegality”.

An employer has one shot to get this right by putting a valid and enforceable restraint in place at the time of contracting. An army of Queens Counsel will not be able to cobble together an invalid restraint after the fact.

 

Tisher Liner FC Law is experienced in drafting, reviewing and enforcing post-employment restraints. For more information please contact Simon Abraham or a member of the Employment Law Team.

Related Articles

View All
Employment Law / Small to Medium Enterprises / Start-ups & Emerging Enterprises

Employment Law updates unpacked: What every employer needs to know

The changes to come into effect will impact workplaces nationwide, necessitating employers’ understanding of their...
Read More
Employment Law

Changes for employers are on the horizon: Key Amendments from the Closing Loopholes bill

The Fair Work Legislation Amendment (Closing Loopholes No 2) Act 2024 (“Closing Loopholes No 2 Act”) received Royal...
Read More
Commercial Law / Commercial Contracts & Agreements / Employment Law

Payroll Tax – Medical Centres and Contracted Practitioners

  The recent SRO Ruling (PTA-041) on 11 August 2023, confirms the SRO’s stance on the payroll tax obligations of...
Read More
Commercial Contracts & Agreements / Employment Law / Litigation & Dispute Resolution

New Limitations On Fixed Term Employment Contracts – Employers need to know what they don’t know!

As of today (6 December 2023), there will be new rules that impact the use of fixed term employment contracts These are...
Read More
Employment Law / Litigation & Dispute Resolution / Commercial Contracts & Agreements

Real Estate Agent Commission Victory shakes up Fair Entitlements Guarantee (FEG) Scheme

Tisher Liner FC Law has been acting on behalf of one such ‘eligible employee’ over the past three (3) years Our...
Read More
Employment Law

Navigating Employment Law Changes – What Employers Need to Know Mid 2023 Part 2

As we enter the latter half of the year, it is imperative for employers and businesses to remain updated on the...
Read More
Employment Law

Navigating Employment Law Changes – What Employers Need to Know Mid 2023 Part 1

As we approach the halfway mark of the year, significant changes are underway in Australia’s employment law...
Read More
Commercial Law / Employment Law / Litigation & Dispute Resolution

International Women’s Day 2023: Embrace Equity

Have you ever wondered why the hallmark colours of International Women’s Day are vibrant purple, bold green and stark...
Read More
Employment Law

Employers Beware! – Minimum Wage increases take effect tomorrow

National Minimum Wage increase The Fair Work Commission has announced the National Minimum Wage (‘NMW’) will...
Read More
Employment Law

Psychiatric injury due to prolonged workplace trauma – a warning for employers from the High Court!

The much anticipated High Court decision of Kozarov v State of Victoria [2020] VSC 78 (Kozarov) has provided much...
Read More
Employment Law / Small to Medium Enterprises

Boosting workplace vaccinations – who needs a third dose?

What are the new vaccine mandates Beginning 12 January 2022, workers over 18 years of age in essential fields, unless...
Read More
Employment Law

‘R E S P E C T’- Part 2 – find out what it means…..for women

As foreshadowed in our previous article, the Federal Government has succumbed to public pressure and taken much needed...
Read More