If I Break My Restraint of Trade Clause, Do I Have A Defence?

It is common for employment contracts to have restraint of trade clauses. These prevent you from doing certain things while you’re working for your employer, or even after your employment has ended.

There are four common types of restraint of trade:

  1. No competition: Where you can’t work with or for a competitor
  2. Non-solicitation: Stops you from taking your employer’s customers
  3. No poaching: Prevents you from taking other employees to your new employer
  4. Confidentiality: Prevents you from sharing or using some information that you learned during your employment

While you may have agreed to these clauses when you signed your employment contract, that doesn’t mean that they’re always able to be enforced. There is an overarching principle that everyone has a right to work so there are some common defences that may be available to you.

Geography

Your employment contract can only stop you from working in a certain geographical area if it’s reasonable. If your employer wants to stop you from working for competitors in the same suburb it may be more reasonable than if they try to prevent you from working for any in Australia.

Length of time

The longer your employment contract tries to stop you from working in your profession, the more likely it will be considered to be unreasonable. But this does depend on a range of factors like the work you do and how your employer’s business may be harmed. For example, if you’re a salesperson and your employer wants to stop you from ever speaking to one of their customers you may have a defence, but if they just want to prevent you from doing so for a month it may be more reasonable.

The type of activities

A restraint of trade may try to restrict you from doing specific activities. You may have a defence if this restraint impacts your ability to work. For example, if you’re an electrician and your employer wants to restrict you from working as a sparky.

The benefit of the restraint

Generally the restraint has to be reasonable to protect your employers interest. If there’s no valid reason for the restraint, or no real or potential harm to them if you aren’t restrained then you may have a defence.

Unfair dismissal

If you can show that you were unfairly dismissed by your employer then they will not be able to rely on the restraint of trade clauses in your contract.

As these examples show, this is a complicated area and there are many ways a restraint of trade clause may be considered unreasonable. If you’d like to find out how to defend yourself, contact one of our experienced advisors at PMF Legal.