VIC Joining Client Company as an Independent Contractor?

[Jack$80]

Hi,

Company A - India Company
Company B - An Australia Company, client of Company A

I am an employee of Company A deputed to Australia on a work permit to work for client Company B. It's now been 2 years since I have been in Australia working as Company A's employee for client Company B.

I got my Permanent Residency a few months ago. My client, Company B, has recently offered me a position as an individual contractor through an agency.

There is a Non-Compete Agreement in my deputation letter which Company A had signed with me when I was in India. The clause says, I shall not accept any employment offer from a Customer. There is a mention of geographical location in the agreement.

Will I face any legal charges if I join Company B? If yes, what will be the legal consequences?

 

[Rod]

Not sure if there are Indian lawyers on this site. Signing a contract in India, with an Indian company means you are likely covered by Indian law, not Australian law.

 

[Matthew Karakoulakis]

Hi Jack,

Business owners often include Restraint of Trade (non-compete) clauses in agreements and they do so to protect the goodwill of their business, their business interests etc. However, the restraint of trade (non-compete) provisions have to be reasonable for them to be valid and enforceable.

The Courts, in determining whether a restraint clause is reasonable, look at whether the clause protects a genuine interest of the business and whether the limitations with respect to time period and geographical area are no greater than necessary to protect interests of the business.

The Courts interpret restraints of trade clauses very strictly and the restraint in your situation would most likely be invalid and unenforceable. The New South Wales Supreme Court in Reed Business Information v Seymour [2010] NSWSC 790 held that restraints should go only so far as to protect the legitimate business interests and found that the restraint of trade (non-compete) clause in the case was unreasonable, as it went beyond the legitimate interests of the business and therefore was held invalid and unenforceable.

In short, the restraints have to be reasonable for them to be valid and enforceable.