{"id":457,"date":"2011-04-07T13:49:01","date_gmt":"2011-04-07T03:49:01","guid":{"rendered":"https:\/\/theveterinarian.com.au\/?p=457"},"modified":"2011-05-03T09:30:49","modified_gmt":"2011-05-02T23:30:49","slug":"employment-law-contracts-restraint-of-trade-provisions","status":"publish","type":"post","link":"https:\/\/theveterinarian.com.au\/?p=457","title":{"rendered":"Employment law contracts \u2013 restraint of trade provisions"},"content":{"rendered":"<div id=\"_mcePaste\"><strong>Restraint of Trade<\/strong><\/div>\r\n<div><\/div>\r\n<div id=\"_mcePaste\">Business owners, in an attempt to protect the goodwillof their business will often include \u2018Restraint of Trade\u2019provisions in employment agreements, partnershipagreements and sale of business agreements. \u2018Standard\u2019clauses are often used instead of tailoring a clause tosuit the specific circumstances<!--more-->\r\n\r\n<\/div>\r\n<\/div>\r\n<div><\/div>\r\n<div>\r\n<div><strong>What are \u2018restraint of trade\u2019 clauses?<\/strong><\/div>\r\n<div><strong>\r\n<\/strong><\/div>\r\n<div>They are a means for employers and partnerships to prevent\u00a0departing employees or partners from taking clients or\u00a0competing with the business for a period of time after they\u00a0leave. They can be very important particularly for businesses\u00a0that rely on client relationships.<\/div>\r\n<div><\/div>\r\n<div>Restraint of trade clauses are also used by people buying\u00a0a business to stop the seller from starting up a competing\u00a0business immediately after the sale.<\/div>\r\n<div><\/div>\r\n<div>Usually the courts will be less likely to uphold a restraint\u00a0between an employer and employee than one preventing a\u00a0seller setting up in competition. This is because an employee\u00a0restraint is effectively preventing an employee from working\u00a0in his or her chosen field whereas a restraint in a business\u00a0sale agreement can benefit both the seller and purchaser.\u00a0It can benefit the purchaser by restraining the seller from\u00a0competing with the purchaser after the sale and it can\u00a0benefit the seller as the giving of a restraint often\u00a0increases the value of what is sold.\r\n\r\n<\/div>\r\n<\/div>\r\n<div><\/div>\r\n<div>\r\n<div><strong>What are the risks?<\/strong><\/div>\r\n<div><strong>\r\n<\/strong><\/div>\r\n<div>Courts will usually only enforce restraint clauses if they are\u00a0\u2018reasonable\u2019. In New South Wales, the Restraints of Trade\u00a0Act 1974 allows a court to \u2018read down\u2019 the terms of a\u00a0restraint clause to modify it (as to the time period or\u00a0geographic area etc) until it is reasonable.<\/div>\r\n\r\n<\/div>\r\n<\/div>\r\n<div><\/div>\r\n<div>\r\n<div><strong>What must you do to ensure a restraint clause can be\u00a0relied upon?<\/strong><\/div>\r\n<div><strong>\r\n<\/strong><\/div>\r\n<div>From the numerous cases that have dealt with restraint\u00a0clauses, the requirements for a restraint to be held\u00a0reasonable are:<\/div>\r\n<\/div>\r\n<div><\/div>\r\n<div>\r\n<div>1. Genuine Interest \u2013 first, to restrain another person, you\u00a0must have a genuine and legitimate interest that needs\u00a0protecting and secondly, the restraint should be limited\u00a0to protecting that interest;<\/div>\r\n<div><\/div>\r\n<div>2. Time Period \u2013 the restraint should not be for a time\u00a0period that is longer than necessary to protect that\u00a0interest;<\/div>\r\n<div><\/div>\r\n<div>3. Geographic Area \u2013 the restraint should not cover a\u00a0geographical area that is larger than necessary to protect\u00a0that interest;<\/div>\r\n<div><\/div>\r\n<div>4. For Employees \u2013 take particular care to ensure that the\u00a0restraint is not so broad as to prevent the employee form\u00a0working at all; and<\/div>\r\n<div><\/div>\r\n<div>5. Cascading Clauses \u2013 with alternative time periods and\u00a0geographic areas may help to \u2018hedge your bets\u2019.<\/div>\r\n<\/div>\r\n<div><\/div>\r\n<div>\r\n<div>Therefore it is critical to identify precisely what interest\u00a0needs to be protected and in what area and for what\u00a0time and then limit the restriction to that. Be wary of any\u00a0so-called \u2019standard\u2019 clauses. If they do not suit the specific\u00a0circumstances, they are likely to be void and unable to be\u00a0enforced. There is little point having an agreement in\u00a0place if you cannot enforce it when necessary.<\/div>\r\n\r\n<\/div>\r\n<\/div>\r\n<div><\/div>\r\n<div>\r\n<div><strong>For further information<\/strong><\/div>\r\n<div><strong>\r\n<\/strong><\/div>\r\n<div>This information is intended only as a basic outline of your\u00a0rights and responsibilities at work. For further information\u00a0consult Greg Martin at Martin Bullock Lawyers.<\/div>\r\n<\/div>\r\n<div><\/div>\r\n<div><\/div>\r\n<div><\/div>\r\n<div><\/div>","protected":false},"excerpt":{"rendered":"<p>Restraint of Trade Business owners, in an attempt to protect the goodwillof their business will often include \u2018Restraint of Trade\u2019provisions in employment agreements, partnershipagreements and sale of business agreements. \u2018Standard\u2019clauses are often used instead of tailoring a clause tosuit the specific circumstances<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[67],"tags":[196,200,202,201,195,197,198,199,203,145],"class_list":["post-457","post","type-post","status-publish","format-standard","hentry","category-features","tag-196","tag-column","tag-contracts","tag-features-2","tag-february","tag-february-2011","tag-law","tag-legal","tag-restraint-of-trade","tag-the-veterinarian"],"rise-blocks_total_comments":0,"rise-blocks_categories":[{"term_id":67,"name":"Features","slug":"features","term_group":0,"term_taxonomy_id":68,"taxonomy":"category","description":"","parent":0,"count":63,"filter":"raw","cat_ID":67,"category_count":63,"category_description":"","cat_name":"Features","category_nicename":"features","category_parent":0}],"rise-blocks_excerpt":"Restraint of Trade Business owners, in an attempt to protect the goodwillof their business will often include \u2018Restraint of Trade\u2019provisions in employment agreements, partnershipagreements and sale of business agreements. \u2018Standard\u2019clauses are often used instead of tailoring a clause tosuit the specific circumstances","blog_post_layout_featured_media_urls":{"thumbnail":"","full":""},"categories_names":{"67":{"name":"Features","link":"https:\/\/theveterinarian.com.au\/?cat=67"}},"tags_names":{"196":{"name":"2011","link":"https:\/\/theveterinarian.com.au\/?tag=2011"},"200":{"name":"column","link":"https:\/\/theveterinarian.com.au\/?tag=column"},"202":{"name":"contracts","link":"https:\/\/theveterinarian.com.au\/?tag=contracts"},"201":{"name":"features","link":"https:\/\/theveterinarian.com.au\/?tag=features-2"},"195":{"name":"February","link":"https:\/\/theveterinarian.com.au\/?tag=february"},"197":{"name":"February 2011","link":"https:\/\/theveterinarian.com.au\/?tag=february-2011"},"198":{"name":"law","link":"https:\/\/theveterinarian.com.au\/?tag=law"},"199":{"name":"legal","link":"https:\/\/theveterinarian.com.au\/?tag=legal"},"203":{"name":"restraint of trade","link":"https:\/\/theveterinarian.com.au\/?tag=restraint-of-trade"},"145":{"name":"The Veterinarian","link":"https:\/\/theveterinarian.com.au\/?tag=the-veterinarian"}},"comments_number":"0","wpmagazine_modules_lite_featured_media_urls":{"thumbnail":"","cvmm-medium":"","cvmm-medium-plus":"","cvmm-portrait":"","cvmm-medium-square":"","cvmm-large":"","cvmm-small":"","full":""},"_links":{"self":[{"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=\/wp\/v2\/posts\/457","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=457"}],"version-history":[{"count":7,"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=\/wp\/v2\/posts\/457\/revisions"}],"predecessor-version":[{"id":475,"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=\/wp\/v2\/posts\/457\/revisions\/475"}],"wp:attachment":[{"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=457"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=457"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/theveterinarian.com.au\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=457"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}