The Supreme Court of Victoria recently granted a temporary interlocutory injunction to enforce a four month restraint of trade clause in a contract of employment in
Hays Specialist Recruitment (Australia) Pty Ltd v Trewin & Hawking (unreported, Supreme Court of Victoria, 4 March 2008).
Two employees of Hays who recruited in the banking and finance sector left to work for a competitor. One of the employees was found to have been dishonest in her reasons for leaving Hays. The same employee had been contacted by a third ex-employee of Hays who had placed considerable pressure on her to take confidential or commercially sensitive information with her to use to the benefit of her new employer. The Court was convinced that there was a “very real risk” of the use of sensitive information and contacts made whilst with Hays “to advance the business of the new employer at the expense of the goodwill and reputation” of Hays.
Despite the fact that the employees only worked in metropolitan Melbourne, the Court considered that a geographical area covering all of Victoria was “reasonable and realistic” as it was a reasonable expectation of Hays that the business would expand beyond metropolitan Melbourne during the course of employment.
The employees were restrained from competing with Hays in the “particular industry sectors”, “markets” and “specialties” in which they worked or had any dealings in the 12 months prior to termination of their employment. It was this “sensible and reasonable qualification” that the Court particularly focused on in finding that the four month restraint was “very reasonable” in the circumstances.
Costs were awarded in favour of Hays, largely on the basis that a final hearing on the matter was unlikely to take place prior to the four month restraint ending.
Interestingly in this case the issue of whether the employees were paid any form of consideration in respect of the restraint was not entertained by the Court. The Court did note however that the employees were not prevented from working for a competitor, they simply could not recruit in the specific sectors or industries in which they had worked for Hays in the 12 months prior to termination of their employment. Furthermore, the employees’ new employer had undertaken to pay them during the restraint period if it was upheld, such that the damage to the employees’ earning capacity was limited.
When including restraints in employment contracts, regard must always be had for the role the particular employee is to perform and whether at the time the restraint is entered into it can be considered reasonable in all the circumstances. In determining whether a restraint is enforceable, the Courts will generally look at the following factors:
- whether there is a legitimate business interest in need of protection;
- whether the employee had access to confidential or sensitive information;
- whether the employee had direct contact with clients or customers such that strong relationships may have developed;
- whether the employee has the capacity to negatively impact the business by working in competition with the employer;
- whether consideration is paid in respect of the restraint;
- in light of the above factors, whether the restraint (having regard to the geographical area and time period) goes no further than is necessary to protect the legitimate business interests of the employer and is not contrary to public policy.
While restraints are prima facie unlawful, the Courts appear to be increasingly likely to enforce employment restraints where there is evidence of dishonesty or misdeeds by employees.
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