| ying highly intelligent and highly qualified employees in | | | | restrictive. Any restraint which tries to prevent an |
| a range of sophisticated commercial businesses is a | | | | employee from working not only in the particular |
| risky business for employers. | | | | business of the former employer but any other |
| To acquire competitive business advantage in an | | | | associated or ancillary business is likely to be struck |
| increasingly globalized and networked world of | | | | down. Likewise, a restraint which seeks to prevent |
| pharmaceuticals, genetics, telecommunications, power | | | | an employee from working for an excessively |
| supply and information technology requires the | | | | lengthy period (generally more than 12 months) is |
| employment of highly qualified, well educated, | | | | also highly likely to be struck down and declared |
| experienced and clever employees. | | | | unenforceable. To overcome these problems, lawyers |
| Potential employers and employees are both well | | | | draft restraint of trade clauses to have a "waterfall" |
| advised to seek legal assistance when drafting or | | | | effect. The clause contains a number of alternatives, |
| accepting terms of employment. Due to the seniority | | | | for example, starting from a very wide restraint and |
| of these employees, their employment contracts are | | | | then proceeding to an increasingly narrow restraint in |
| less likely to be workplace agreements but more | | | | terms of future employment activities or in terms of |
| likely to be private , one-off, contracts of | | | | length of time. Each one of the alternatives is |
| employment. | | | | severable from the contract if declared |
| Often, employees in the pharmaceuticals, genetics, | | | | unenforceable by a court. Accordingly, a court might |
| telecommunications, power supply and information | | | | reject a restraint which provided for former |
| technology industries will have access to secret and | | | | employee X not to be employed in any |
| confidential information which is both price and | | | | pharmaceutical industry within South East Asia |
| market-sensitive. This information might be chemical | | | | including Australia. The court, on the other hand, may |
| formulae, scientific and technological data, chemical, | | | | be prepared to enforce a restraint which prevented |
| electrical or manufacturing trade processes, hardware | | | | employee X from being employed in the field of |
| or software engineering designs, or a range of other | | | | molecular genetic artificial-blood technology in either |
| sophisticated technological and scientific information. | | | | Melbourne or in Sydney for a period of one year. |
| The potential employee will need access to this | | | | Such a restraint is far more precise and reasonably |
| information to perform his or her anticipated role. | | | | protects the former employer's confidential |
| When the employment relationship ends, however, | | | | information whilst allowing the employee to seek |
| the employer is faced with a double problem. First, | | | | employment in the general field of molecular genetics. |
| the employee is leaving. Whether the departure is | | | | A court must also be satisfied that an employer's |
| voluntary or involuntary, it will be an inconvenience | | | | fears are genuine. For instance, is the information |
| and a disruption to the employer. Secondly, and more | | | | really secret and confidential? If the information is |
| importantly long term, the departing employee will | | | | only knowledge which an employee would obtain |
| take with him or her, knowledge of the secret and | | | | through the repetitive working of his or her ordinary |
| confidential information which may be the very basis | | | | job, courts are less likely to regard this as secret or |
| of the employer's competitive advantage in a | | | | confidential information. Other sorts of information |
| particular industry or market. | | | | which are publicly available (even such as client |
| To minimise this long term disruption, employers | | | | contact details and price lists) may also not qualify. If |
| often include restraint of trade clauses in employment | | | | there is no secret or confidential information, then |
| contracts when employing people in these sensitive | | | | there can be no restraint of trade. |
| areas. Commonly, the restraint of trade will prevent | | | | Courts will also look to see whether the employee |
| the former employee from seeking employment with | | | | was specifically compensated for the restraint when |
| any competitor of the former employer in the | | | | first employed. If an employee received a specific |
| particular market for a period of time. | | | | additional sum as a hiring incentive for a longer than |
| In current times, where there is a shortage of trained | | | | normal restraint of trade, courts are more likely to be |
| staff, particularly in scientific and technological areas, | | | | persuaded that the restraint, when ultimately applied, |
| the reason why an employee departs is generally | | | | is reasonable. The employee has accepted the |
| because he or she has received a better offer from | | | | restraint when first employed and has received a |
| a competitor. | | | | specific benefit for it. |
| In deciding whether or not to enforce the restraint | | | | Another factor which courts will examine is the |
| of trade clause against a departing employee, | | | | seniority of the former employee. The more senior, |
| Victorian courts have to balance a number of | | | | the more likely it may be that the now departed |
| competing factors. | | | | employee may be capable of encouraging other staff |
| First, neither Australian nor Victorian general law will | | | | to follow him or her and more capable of influencing |
| restrain a former employee from seeking | | | | former clients to switch allegiance. Alternatively, if the |
| employment with a competitor. Any such restraint | | | | former employee was not employed in a managerial |
| must be found in an enforceable clause in the | | | | position and was only employed at either a junior or |
| contract of employment with the former employer. | | | | specific technical level, courts may be less worried |
| Employers, therefore, should always ensure that | | | | about wholesale client or staff defections which |
| staff are employed pursuant to written contracts of | | | | would need to be prevented by the restraint of |
| employment which contain enforceable restraints of | | | | trade clause. |
| trade. | | | | Until recently, courts seemed reluctant to enforce |
| Secondly, Victorian courts will not allow employers to | | | | restraints of trade for more than 3-6 months. |
| prevent former employees from conducting a living | | | | However, recent New South Wales Supreme Court |
| by practising the skills which may have taken many | | | | authorities seem to be swinging the pendulum back in |
| years to acquire through university courses or | | | | favour of employers where the balancing exercise |
| practical experience. However, this is only a general | | | | outlined above suggests that the restraint of trade |
| rule or starting point. | | | | does need to be enforced to reasonably protect the |
| Thirdly, Victorian courts will not allow former | | | | former employer's market and confidential |
| employees to obtain an unfair springboard into a new | | | | information interests. For instance, Brereton, J., in |
| career by abusing the trust of the former employer. | | | | John Fairfax Publications Pty Ltd v. Bert & Ors |
| Examples are where employees spend an entire | | | | [2006] N.S.W.S.C. 995 upheld a restraint of trade for |
| weekend photocopying price lists, formulae, client | | | | 12 months in relation to a former employee who had |
| contact details and other confidential information and | | | | been employed at a senior level. The same judge, in |
| then resign the following Monday morning to set up a | | | | Cactus Imaging Pty Ltd v. Peters [2006] N.S.W.S.C. 17 |
| competitive business the following Tuesday morning. | | | | (18 July 2006) also enforced a restraint of trade for |
| Essentially, Victorian courts perform a balancing act | | | | 12 months in a situation where the former employee |
| between the competing interests of the employee | | | | operated in a restrictive market or oligopoly. |
| to be able to continue to gain a living on the one | | | | This is a complex area of law. Contracts of |
| hand and the employer's interests of being able to | | | | employment generally and restraints of trade |
| reasonably prevent the disclosure of confidential and | | | | particularly need to be carefully drafted to have their |
| secret trade-sensitive information to competitors | | | | intended legal effect. |
| when the employment relationship ceases. | | | | Employers and employees need to be carefully |
| The sorts of factors courts have taken into account | | | | advised on the range of tactics available in post |
| are as follows. First, Victorian courts will look to see | | | | employment scenarios. |
| whether the restraint of trade is reasonable or is too | | | | |