A new job offer arrives, the start date is close and the contract runs to twelve pages. Somewhere near the back is a clause that says what you can’t do after you leave: work for a competitor, approach clients, hire away your colleagues. Most people sign it without a second look. It’s the clause we’re most often asked about two years later.
What a restraint clause does
A restraint of trade limits what you can do after your employment ends. Typical clauses cover three things: working for a competing business, approaching the employer’s clients and poaching its staff. They usually set a period, such as six or twelve months, and an area, such as Melbourne or Victoria.
Australian courts start from the position that a restraint is unenforceable unless it goes no further than is reasonably needed to protect a legitimate business interest, such as client connections or confidential information. A blanket ban on working in your field for a year is much harder for an employer to enforce than a short ban on approaching the clients you looked after.
Three lines to read closely
You don’t need to read the clause like a lawyer to spot the parts that matter. Look for:
the activity: is it every competitor, or only the clients and staff you actually dealt with?
the period: how long it lasts after you leave, and whether it runs from your last day or from when notice was given;
the area: whether it’s limited to where you worked or covers the whole country.
Some contracts use a “cascading” clause that lists several periods and areas, leaving a court to pick the widest one it will enforce. If you see a table of options, that’s what it is.
Negotiate before you sign, not after
The best time to change a restraint is before you accept the offer, while the employer wants you to start. Reasonable requests are often agreed: a shorter period, a narrower area, or limiting the clause to clients you personally served. Put the request in writing and keep it short.
If the employer won’t move, you still know something you didn’t before. You can weigh the role against what the restraint might cost you later, rather than finding out on your way out the door.
Confidentiality lasts longer
Restraints end; confidentiality usually doesn’t. Even after the restraint period, you can’t use your former employer’s confidential information, such as client lists or pricing, in a new role. Keep what you take with you to what’s genuinely yours.
If you’re already bound by one
If you’re leaving a job and worried about a restraint you signed years ago, don’t assume it can’t be enforced, and don’t assume it can. Employers do go to court over restraints, usually when a departing employee takes clients or confidential material with them. Get advice before you accept the new role or contact former clients.
Bring us the contract, the new offer and a short note of what you did in the old role. Eleanor or Ben will tell you how much of the clause is likely to hold and what you can safely do in the meantime.
