NSW Will Contractor Agreement Still be Valid?

[aaronpch]

Hi,

I am currently a physiotherapist contractor working for my boss. In the employment contract, there is a clause stating I am prohibited to work within 5km radius of the clinic for 12 months after the termination of the agreement. However, I have mentioned to my boss that I would like to change from a contractor agreement to a rental agreement in the future.

Just wondering would that clause still have legal power after I changed from contractor arrangement to rental arrangement? When can I start working within that 5km radius? Is it right after I start my rental agreement? Or 12 months after the start of my rental agreement (i.e. 12 months after the end of the contractor agreement)?

 

[Lance]

Hi Aaron,

To the letter of the contract, it would be 12months after you finish your employment as a contractor. But if your boss is a party to the new contract they can waive the original contact clause.

I would get something in writing from your boss to state that the clause is revoked, you both agree and sign it. That way, if things go sour your should be covered. The clause is obviously in place to protect the clinic from having its clients poached, so if you are still working there it shouldn't be a problem.

 

[Rob Legat - SBPL]

'Restriction of trade' clauses (such as this) are notoriously hard to enforce. While the employer has an interest in not having a competitor open up on its doorstep who has the benefit of their knowledge, the employee has an interest in being able to obtain a job and earn a living.

Five kilometres is a fairly small radius, but how fair it is depends on other factors. For example, a 5km exclusion in a country town with one operator may be disastrous - while the same distance in a built up area with many employment options reasonably outside that area may not be a big issue.

The best option is to always discuss the issue and come to an understanding before it becomes a problem. You'll need to terminate the existing contract to make room for the rental agreement. As Lance said, ask the employer whether they're prepared to release you from the restriction as part of the deal.

 

[Serge Gorval]

The above 2 posts are missing the salient point. If you are a genuine contractor and not an employee, then the restraint holds no weight. It's unclear from your post what you actually are.

You say contractor but mention employment agreement. Firstly, you need to properly identify the relationship...

 

[Tim W]

Let's talk about what we are really talking about.
If you have a "boss", then you are likely to be in a sham contracting arrangement.

Have a read about a thing called the "Control Test", then, with that in mind,
ask yourself these questions:

• Whose patients are they - yours, or the principal's (ie your employer's) ?
  (a good test of that is whether or not you have unrestricted access
  to the files of "your patients", even if centrally stored);
  
  
• Does it have to be you that works?
  For example, if you wanted to send in a locum because you want a holiday,
  or were sick, can you just send one of your own choosing,
  or do you need some kind of consent from your employer?
  
  
• Are you liable for your own professional indemnity and (maybe) public liability insurance?
  
  
• What are the arrangements for sick leave?
  
  
• Do you get a pay packet, or do you bill on a Tax Invoice?
  
  
• Is there a dispute resolution clause in the contract?
  
  
• Who does your tax? Who is paying your super?

Do not trouble yourself about the restraint clause.

As a general rule, if the effect of a restraint clause is to limit (otherwise fair market) competition,
or to unfairly protect a monopoly in a small or closed market (eg the only physio in the village), or
limits your right to work in the field (you are, after all, supposedly independent!), or
is in some other way unreasonable, then you may find that the court would hold the restraint of trade clause to be inoperative.