Blog

Articles and legal news from the Atkinson Vinden Team.

Restraints: Why they are crucial in employment contracts

Employment Law

Whilst your employees are your best assets, are they taking your client lists, trade secrets, confidential information and intellectual property when they leave?

In Australia nearly a 1/4 of all new employees will leave their job within their first year (23%). Staff turnover and the threat of ex-employees costs businesses in salary, resources, opportunity cost, efficiency, problems with their work performed, replacement costs and cultural issues for the company.

Restraining former employees from approaching customers, suppliers, employees and competing with your business is essential for the highly trained, specialised skills required by valuable employees. The most vulnerable areas of the business are client lists, trade secrets, confidential information and intellectual property. As in most aspects of your business, your interests are best served by considering the issues before they arise and reaching clear arrangements with your staff. Your employees are your best asset, however they can become a headache when poorly managed.

In a case we recently advised on, the employee had worked her way up the leadership ladder over a number of years to a central sales and management role. When she left to start her own competing business, the Company realised it had never entered an Employment Contract with restraint, non-compete or confidentiality terms. This left the Company exposed as the employee began to poach customers from the Company.

Restraints are enforceable if properly drafted. Key points to ensure are covered include that the restraint is justifiable in the context of the real business interests of the employer, and are not so overly onerous as to cause an injustice to the employee concerned. Often when we link the restraint to client and customer relationships that the employee has been directly involved with, rather than generic restraints that cover every aspect of a business, we have the best chance of enforcing the restraint. Let us know if we can assist you in this area. Please contact any member of our Employment Law Team for any further assistance you may require.