UK Restraint of Trade - Legal in Australia?

[Deadcat]

Hello

I am originally from the UK & the terms of employment that I (perhaps somewhat foolishly) signed in the UK before I came out restricts my trade insofar as it named the 3 other major players in the market and stated that I cannot work for them for 6 months if my employment is terminated for any reason. My industry has 4 major players world wide and so this means I can't really work for anyone else, unless I can survive 6 months without a salary. This restraint of trade statement does say it only applies to the same area, not that that helps me as I do not wish to move.

I am fairly certain that this is not legal in Europe but not certain about here, can anyone shed any light on this?

Regards

C

 

[DennisD]

Hi Deadcat

On first glance the restraint which prohibits you from working for any of 'the big 4' for 6 months may seem excessive, however this area of law can be tricky. You are right in that there are indeed differences between laws in the UK and laws in Australia when it comes to restraint of trade clauses. Check the governing law clause in your contract to see which laws apply

Below is a general discussion of how restraints of trade clauses have been treated in recent times in Australia, and concludes that in this particular area of law the specific facts are very important, and the consequences of getting it wrong can hurt, so tread carefully. For that reason, you may need to take your question beyond this forum and formally engage a lawyer for guidance

Hope this helps. It will be good to see if other contributors have practical suggestions for you

Hugh


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General discussion:

In simplistic terms, to be upheld restraints of trade clauses generally need to fall within what is reasonably necessary to protect the legitimate business interests of the employer, and it is for the employer to show as much. That will be counterbalanced by the need to ensure people remain free to ply their trade in competitive markets. However, where the balance is struck will turn upon the facts of the case, and the recent case law does not provide any sharp line tests in my view.

To determine the validity of the clause, the kinds of things which would be relevant include, among others, that the period of restraint is not excessive given the role filled. For example, longer periods may be more suitable for employees with high access to confidential information and trade secrets (in some cases the restrain period is significantly longer than six months, though it will depend on the facts in each case). Also, it matters that the activities which are prohibited under the clause are similar to those which were undertaken by the employee in their role.

It really is necessary to look at the contract and facts in full detail before being in a position to provide an informed opinion. This is because restraints of trade clauses can be drafted in different ways which will affect their interpretation (one example being so called 'cascading' or 'waterfall' clauses). Also the nature of the restraints themselves can differ (for example, when you say, '... the same area...' do you mean an industry/industry subsector, or a geographical locality, or something else?) Further, breaching a restraint of trade clause may trigger payment of a sum under the contract. So you are absolutely right to take your post employment obligations seriously and to tread carefully.

 

[Rod]

Amount of pay is also a factor. ie: Does your pay have a component to help offset the restraint period.

If you are a non-executive on normal pay working an average job (ie with non-sensitive information/duties) then restraint clauses are hard for an employer to enforce here in Australia. The general principle the court likes to apply is that you are not stopped from earning a living. However they will consider whether or not your previous job compensated you for this restraint period.