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Employment law
i Non-competition covenants
Non-competition covenants are permitted and enforceable. However, there are some complexities.
The starting point is that post-employment restraints (whether in the nature of non-competition or non-solicitation covenants) are presumed to be invalid and unenforceable. This is because such restraints are considered to be contrary to public policy: the law does not like to see an individual prohibited from working in their lawful trade and generating an income.
The onus falls on employers to demonstrate that, on the basis of its particular circumstances, a restraint is reasonable (having regard to the interests of the employer, the employee and the public) and is no wider than is reasonably necessary to protect the employer's legitimate interests.
There is a large and constantly evolving body of case law that sheds light on when a post-employment restraint is reasonable. Courts will have regard to the nature and extent of the restraint, its geographical reach and its duration. Insofar as the nature of a restraint is concerned, Australian courts are far more reluctant to enforce non-competition covenants than non-solicitation covenants (as to which see below). Non-competition covenants are rarely enforced unless a former employer agrees to compensate their former employee for their inability to work during the restraint period. This usually involves the former employer paying the former employee a sum equivalent to the...
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