Enforceability of post-employment restraints

Authored by Luana Payne, Lawyer Senior Associate and Alannah Hogan, Lawyer, Corrs Chambers Westgarth. Updated by the LexisNexis Legal Writer team.

This guidance note provides guidance on the enforceability of post-employment restraints.

It should also be read alongside these Guidance Notes: Introduction to post-employment restraints, Drafting post-employment restraint clauses and What is a repudiatory breach of the employment contract?

Introduction to post-employment restraints

Post-employment restraints are express contractual provisions which seek to restrict an employee from competing with the employer following termination of the employment relationship. Recent surveys suggest up to one in five Australian employees are covered by such restraints. Post-employment restraints are usually framed by reference to:

• a geographical area (eg Sydney);
• a period of time (eg 6 months post-employment);
• defined industries, businesses or activities that the employee cannot be involved in; and
• former customers/clients or employees who the employee cannot contact or solicit.

The purpose of post-employment restraints is to protect legitimate business interests of the employer. Interests that are capable of supporting a restraint include the employer’s confidential information, trade secrets, customer relationships, goodwill and staff.

Although restraints remain significant in Australia, other comparable jurisdictions such as Canada have moved to prohibit the use of such restraints utilizing provisions in Federal competition law and provincial employment laws.