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Is your business protected from rogue employees or contractors?

Employment Law News | June 2015

Business owners may consider reviewing their employment and their contractor agreements to ensure that the business is sufficiently protected during and after the termination of an employment or contractor arrangement.

The two main types of terms adopted in such contracts are “confidentiality” clauses and “restraint” clauses.

A restraint of trade clause attempts to regulate or restrict an employee, or former employee’s conduct during and at the end of the course of their employment. To a lesser extent these terms may apply to contractor arrangements. The flip side of these restraints is a public policy position that no-one should be unreasonably restrained from working within their chosen skill set.

It is important to ensure that each term of any contract is reasonable to ensure that it is enforceable.  Restraint of trade clauses are enforceable to the extent considered reasonably necessary to protect the legitimate business interests of an employer.  This includes trade secrets, intellectual property, confidential information and relationships with staff and customers and attempts by employees to compete with the former employer, in certain circumstances.  If a restraint of trade clause is considered to be unreasonable or unenforceable an employer will not be able to enforce the restraint unless some other type of written agreement has been entered into.

Enforcement of a restraint of trade clause can be sought through litigation or injunctive relief from the Court.  To obtain injunctive relief an employer must show the Court that the restraint is reasonably necessary to protect their legitimate business interests in a particular industry and location. For example if the restraint refers to a “territory” in a remote area it will most likely be a larger area of restraint than in a high density urban area.

Some key points for employers to remember

  • Frequently reviewing employment contracts will assist in ensuring that duties of employees are accurately defined and employees are aware of their obligations;
  • Any proposed period of restraint is commensurate with the employee’s level of seniority and salary and the type of industry in which they are engaged;
  • Confidentiality clauses should be included as an addition to any restraint of trade clause and include aspects of digital information and electronic communications and social media.

Forum Law Solicitors can advise on and assist with the drafting of various agreements, including employment agreements and agreements for suppliers, creation or dissolution of partnerships or other business structures.  For advice or assistance with your employment contracts, please contact us on 02 9560 3388 or email us at admin@forumlaw.com.au

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