Are Employee Restraints and Anti-Competition Clauses Enforceable in Queensland?
When employees leave a business in Queensland, employers often worry about the risk of ex-employees taking clients or starting a competing business. To mitigate this, employers commonly use restrictive clauses in employment contracts. But the big question is: are these clauses enforceable under Queensland law? Let’s dive into restraint of trade and anti-competition clauses and how they work.
What Are Restraint Clauses?
Restraint of trade clauses are designed to prevent ex-employees from working for competitors or starting a competing business within a specific time and geographic location after leaving their job. Similarly, anti-competition clauses aim to stop ex-employees from soliciting or dealing with clients they served while at the company.
Why Do Companies in Queensland Use Restraint Clauses?
Queensland companies invest heavily in developing their products, services, and client relationships, as well as protecting confidential information. These investments can be compromised if a former employee attempts to leverage these assets to compete against them. Restraint clauses are used to protect these interests and deter ex-employees from exploiting their knowledge and connections.
When Are Restraint Clauses Enforceable in Queensland?
The enforceability of restraint clauses in Queensland depends on their reasonableness. Courts consider whether the restraint is necessary to protect the employer’s legitimate interests without overly restricting the ex-employee’s ability to work. Generally, a restraint period up to 12 months and a geographic scope limited to where the employee actually worked are seen as reasonable. Clauses that are too broad or restrictive are often unenforceable.
What Makes a Restraint Clause Unenforceable in Queensland?
A restraint clause may be struck down or modified by the court if it is deemed excessively harsh or goes beyond what is necessary to protect the employer’s interests. Clauses that effectively prevent an individual from working in their field entirely, contain excessive time periods, cover excessively wide geographic areas, or include broad definitions of competing businesses and client restrictions are usually deemed unenforceable.
Seeking Legal Advice in Queensland
Navigating employment restraints involves balancing competing interests, making it crucial to seek legal advice in Queensland. Whether you’re considering signing a contract with restrictive clauses or enforcing restraints on a former employee. If you are an employer it is essential to consult a legal expert who can help draft enforceable restraint clauses. For employee's it is always best to obtain legal advice before signing any contract of employment. However, before you leave your current job, if you have already signed one, check with us first for advice on restraints and anti-competition clauses.
Conclusion
Restraint of trade and anti-competition clauses have their limits under Queensland law. For expert guidance on this complex area, consult with a Queensland legal professional to ensure your rights and interests are protected.
A recent NSW superior decision Breedon v Oosthuizen [2023] NSWSC 859 involved Oosthuizen and his new company using clients from the former partnership with Breedon. Temporary orders were made restraining Oosthuizen and his company from approaching clients of the former partnership.
A QLD proceeding DJRA Pty Ltd as Trustee for DJRA Unit Trust v Griffin [2020] QDC 178 involves Griffin a former employee of DJRA starting a new business after he resigned. DJRA filed an application to restrain Griffin from use of client confidential information, however the applicant could not establish loss. This lead to the application being dismissed.
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