Recently a number of stoushes about the enforcement of post-employment restraints of trade – including one that captivated the legal industry for many months last year – have played out publicly.
Their high profile nature means it is timely for big business to re-evaluate their restraints of trade to make sure they are effective – emphasised by the fact we are seeing movement in many industries (including the legal industry) picking up pace as teams relocate as a result of mergers and the continued impact of globalisation.
Restraint of trade provisions are common in many employment contracts, but whether or not a business takes steps to hold an outgoing employee to account is a different question. This can be for a range of reasons – for example, not wanting to be the “bad guy”, or where the relationship has fractured to a point where culturally, both parties are happy to move on.
But more commonly, it comes down to the fact that when the rubber hits the road, a closer inspection of the applicable restraints shows that the business doesn’t have a good case to enforce the restraints or that – even if they are enforceable – they don’t give the business the protection it really needs.
There are 3 key strategies to increase the chances that your restraints are effective – keeping you out of court and off the front pages:
- tailor your restraints to your business and to the employee – the cases highlight that restraints should be designed carefully to reflect what is actually important to the business and the job of the particular employee. While there is a superficial attractiveness to broad restraints, you need to think about what aspects of the employee’s role justify restricting them in some way after they leave – the courts don’t often like boiler-plate or broad-brush provisions to which no thought has been given.
- don’t be blinded by love – we all know the feeling of meeting someone new, making a connection, and thinking about how great your lives will be together. We ignore the faults that stare our friends in the face – because we can’t possibly think of how the relationship would ever turn sour. When it comes to recruitment, that applies too. You should very carefully consider any employee’s request to delete or modify key aspects of the restraint provisions (including, for example, reducing restraint periods, or waiving restraints if certain things happen) – because we all know some relationships just don’t last.
- re-evaluate contracts during the employment relationship – you would expect productive and valuable employees to progress and succeed in your business. However, promotions – and particularly senior promotions – often mean the employee has increased access to confidential information/business strategies, key clients/customers and talented fellow employees. Consider promotions as a good opportunity to look carefully at whether the existing restraints are sufficient to protect the company’s interests – it might be worth issuing an updated contract with new restraints at that point.