Restraint of Trade
Many contracts of employment seek to impose restrictions upon the conduct of employees once the employment contract has been terminated. In determining whether to enforce clauses of this nature, the courts will weigh the public interest that there be a minimum restriction upon each citizen’s right to work against the employer's entitlement to reasonable protection of their legitimate business interests.
The courts will not generally enforce a blanket ban on competition that is not reasonable. The court will be more sympathetic to enforcing clauses designed to prevent an employee exploiting confidential information obtained during employment or personal acquaintance with customers or “trade secrets”. The restraint of trade clause should not exceed what is necessary to achieve this protection.
Restraint of trade clauses typically seek to restrain employees from:
- Trading in a competing business for a specific period of time within a specified geographical territory.
- Undertaking specific activities – for example, soliciting or dealing with existing customers of the employer.
The courts will judge each case on its specific facts; what is reasonable protection for a solicitor’s practice may be excessive for a sandwich shop.
An action to enforce a restraint of trade clause is brought through the civil courts seeking a remedy of an injunction and/or damages (compensation for loss). Cases of this kind are inherently risky because the outcomes are often so “fact specific”. This is a difficult and fast changing area of law and prompt and expert advice is necessary.
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