What is a Restraint Clause?

  • Blog
  • What is a Restraint Clause?
View All Articles

Scroll for more

Business owners put a lot of hard work and effort into building their business. It is important to protect your commercial information and intellectual property.

What do you do when an employee leaves to work for a competitor?

Firstly, it is very important to have a well drafted employment agreement in place which contains strong restraint of trade clauses in place which gives you protection against employees or ex-employees exploiting your business.

Often this will include what is commonly referred to as a cascading restraint clause which provides a reducing time and/or geographical area.

The employment agreement will clearly bring to the attention of the employee their obligations pursuant to the restraint clause.

What is a restraint clause?

Basically, there are two types of restraint clauses:

  1. non-competition clauses, which prevent ex-employees from working with direct competitors for a specific period or distance after their employment ceases; or
  2. non-solicitation clauses, which prevent ex-employees from soliciting clients and current staff from your business.

What do you do when an employee leaves your employment and breaches their restraint of trade clause?

  1. You can send the ex-employee and/or the new employer a letter outlining and reminding them of their obligations;
  2. Require the ex-employee to sign an undertaking to stop breaching the restraint of trade clause and maintain confidentiality;
  3. If the above does not stop the behaviour, then you can seek an injunction through the courts and/or damages suffered to your business

Many businesses will have the employee sign an exit deed when they leave to reinforce the restraint of trade clause ad that you will enforce the obligations against them if necessary. There is no obligation on an employee to sign an exit deed but when done it can be a powerful tool.

It is important to remember restraint of trade clauses are complex and can be costly to enforce through the courts. Therefore a well-drafted clause in the employment agreements is essential.

At FC Lawyers we have acted for businesses in a large range of industries to secure their employment agreements are drafted correctly including the very important restraint of trade clauses.

Contact our team of business and commercial lawyers today to discuss your employment law needs.

The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.

WE’RE HERE TO HELP

Prefer to get in touch?

With offices in Brisbane, Sunshine Coast, North Queensland and Sydney, our team is well equipped to provide both advice and support across a broad range of legal areas.

phone-icon
Free call 1800 640 509
  • This field is for validation purposes and should be left unchanged.