27 JUNE 2012
Post termination restraints may be enforceable where carefully tailored to the specific role accepted by the employee and provided the restraint is not wider than reasonable to protect the employers’ interests.
Recently, courts have upheld post termination restraints as valid in the following circumstances:
- A very senior employee was restrained for a period of 2 years post employment from working for a direct competitor. Key factors influencing the decision were:
- the terms of the restraint were the subject of specific negotiation between the employer and employee;
- the restraint was carefully drafted with the employee’s very senior position and intimate knowledge of client relationships, pricing and strategies in mind;
- the employee received monetary consideration during the period of the restraint;and
- the employee obtained legal advice before agreeing to the restraint.
- A junior employee was restrained for 3 years from providing services to a client of the employer for whom he had worked. Factors influencing enforcement of this restraint included:
- the restraint was relatively narrow and the time period reasonable; and
- the employee was entitled to service that client if he paid an agreed amount of damages (75% of fees incurred by that client with the employer in the prior financial year).
Whilst generally, courts are reluctant to enforce post termination restraints they may be enforceable if carefully drawn.
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[contactsbox] [leftcolumn]Contact Partner: Francesca Petroccitto
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