From non-competes to non-solicitations – what are the legal ramifications in Australia?
It’s often a controversial topic as to whether restraint of trade clauses are enforceable or not. The answer isn’t simple at all – in fact it’s a legal grey area – dependent upon your employment contract, which state of Australia you are in, and what were the circumstances that the alleged breach has happened between employee and employer.
Employers use restraint of trade clauses to protect their business interests by including them in employee contracts to restrict employees’ freedom to undertake specific activities during or after employment has ended. Common restraints include confidentiality clauses; non-compete, non-recruitment and non-solicitation clauses.
“The main sources of obligations are contained in an individual’s employment contract, or a restraint deed or similar,” Shivchand Jhinku, Herbert Smith Freehills partner, told HRD. “To a lesser extent, they can be contained in a sale agreement, for example, where a business has been sold. Australian employers commonly impose non-compete, non-solicit of clients, employees and suppliers, and non-dealing with clients, such as not accepting approaches from clients restraints on their employees.
“The usual way that these are drafted is through the use of a ‘ladder’ clause, both in relation to length of time, for example such as , 12, nine, six or three months, and geographical area such as New South Wales or Sydney.
“In New South...
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