Enforcing post-employment restraints

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As an employer and business owner, protecting your legitimate business interests is a concern when an employee’s employment comes to an end. One of the main ways of protecting this legitimate business interest is to have restraint clauses within the employment contract. However, are restraint clauses enforceable if it is the employer that repudiates the contract.

Post-employment restraints often expressly state that they continue to apply after termination regardless of the reason for the termination. Because such an express provision is included in the employment contract, on a contract construction position, this would mean that the restraint clause would be enforceable even if the employer repudiates the contract.

However, a recent Victorian Supreme Court decision held that “an employee’s post-employment restraint of trade obligations do not survive the termination of the employment contract where termination is effected by the employee accepting the employer’s repudiation of the contract”.

This decision was due to either:

  1. An employer is not entitled to obtain equitable relief to enforce the restraints in circumstances where it had not performed its part of the contract; or
  2. Where the circumstances are due to the employer’s repudiation they court no longer be considered reasonably necessary to protect their legitimate business interests.

Conclusion

Employer’s must be aware that if they repudiate the employment contract, they are unable to rely on any restraint clauses either expressly stated or implied in the employment contract.

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Authored by

Raea Khan

Director Lawyer

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Raea Khan Circle
Director Lawyer
Raea Khan

Raea is Managing Director and Principal Lawyer for PBl Law Group. Raea assists clients with major projects, property developments, construction and strata law.

He has worked in Western Australia and Queensland assisting with expansion projects in the energy and resource sector and now predominately advises clients in Strata and Community Association matters.

He is a member of the Australian College of Strata Lawyers where majority of his work is advising developers and owners corporations with dispute related minor and major defects, strata governance and common property litigation. He is proficient at leading negotiations and meetings.

Raea has a particular interest in the commercial aspect of any dispute and always tries to weigh up the risk, reward and benefit of legal proceedings at each different stage.

Raea enjoys all forms of competitive sport, including Crossfit and actively participates in Triathlons, representing Australia as an age group athlete. He was a member of Red Head Surf Lifesaving club.

  • Strata Law
  • Construction & Major Projects
  • Commercial and Business Law
  • Planning & Environment Law