Post-employment restraints are an important method used by businesses in order to secure their client base and maintain a competitive advantage. If they are poorly executed however, they can be a recipe for disaster.
This was illustrated in the recent case of Marlov Pty Ltd v Murat Col [2009] NSWSC 501, where the employer’s attempt to enforce post-employment restrictions failed.
Marlov Pty Ltd, operating as a real estate agent, sought to enforce post-employment restraints against Murat Col, a former employee, who had commenced employment with a competing business.
Marlov claimed that Mr Col breached his post-employment restraints by engaging in a competing business with them, as well as soliciting their clients.
The Court held in favour of Mr Col, finding that he did not approach Marlov’s clients but rather that they actively approached him. They also found that the nature of the real estate industry was such that there was “no special relationship with clients”. Due to this, the Court held that the employment restrictions against Mr Col were invalid.
What should organisations be aware of?
Corinna Elliott, a workplace relations lawyer, says that to ensure post-contractual restrictions will be valid, employers need to take care not to extend the restriction beyond what is reasonably necessary to protect their interests.
If the restraint goes further than what is considered reasonable to protect such an interest, the clause will usually be deemed invalid and unenforceable at law.
Ben Motro, a solicitor in business law, says that employers should be aware of the difficulties in enforcing such post-contractual restraints and should adopt a highly flexible approach to this task.
“The Court’s decision [in this case] recognises the continuing need to restrain certain employees, while at the same time identifying the difficulties with enforcing such restraints,” he says.
“Employers…need to closely tailor restraints to each employee, rather than use a broad- brush approach.”
What can your organisation do?
As evidenced by the above case, this is a complex and quite specialised area of workplace relations law. As such, it is one which is most effectively dealt with by experts in the field. One mistake could be costly for your business.
It is essential that you consult with lawyers or human resources professionals who can help take the guess work out of this area. They will ensure that your organisation’s employment policies and contractual agreements are well-drafted and legally complaint. They may also offers a wide range of other products and services which can assist your firm in achieving its goals - both now and into the future.
Dizem Ramadan - Dizem Ramadan is a freelance journalist who has had work published on a variety of topics and in numerous publications including ...
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