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Enforcement of Restraint of Trade

The recent decision in DP World Sydney Ltd v Guy [2016] in the New South Wales Supreme Court provides a practical example where an employer sought and succeeded in preventing a former employee, by interlocutory injunction, from working for a competitor company based on the restraint of trade clause in the employee’s employment contract.

The employee was a General Manager of DP World Sydney Ltd (a port and supply chain operator) and throughout the course of his employment had access to confidential information. The court considered the employee’s 6 month restraint period and found that the restraint period was reasonable and enforceable against the employee based on the following:

  • the nature of the confidential information that the employee had access to during the term of his employment was highly sensitive, it included expansion plans and the location of such expansion plans, projection of customer volumes, revenue of the company etc, therefore the employer had a legitimate interest in need of protection;
  • the employee had a senior role throughout the term of his employment;
  • the employee had built strong relationships with the employer’s clients;
  • the industry which the employer and the competitor operated in was small with few competitors; and
  • the employer offered to pay 3 months’ salary during the restraint period, therefore alleviating potential financial hardship on the employee in not being able to take up employment with the competitor.

The above case evidences the importance of having an enforceable, reasonable and valid restraint in employment contracts if an employer hopes to rely on it to enforce a former employee’s post-employment obligations.

At Tait & Co Business Lawyers we are able to review, draft and advise on restraint clauses and their enforceability. If your business needs assistance please contact us on 08 9422 8111 or email buslaw@taitlegal.com.au.