I run a labour hire company. What type of restraint of trade clauses are available to me?

As a labour hire company owner, you understand better than most the importance of limiting your employees’ actions, both during the term of the engagement and after termination. Your employees occupy a special position of privilege and power in that they are made privy not only to your sensitive business information and processes, but also the business information and processes of your clients. As such, it is only natural that you would want to protect yourself against unscrupulous workers who wish to usurp your business for their own personal benefit. Restraint of trade clauses are an easy way to prevent your current and past employees from certain conduct for a period of time. The primary types of restraint of trade clauses available to you are:

1. non-competition clauses and non-solicitation clauses;
2. exclusive service clauses; and
3. garden leave clauses.

Non-competition and non-solicitation clauses

These types of restraint of trade clauses purport to prevent employees from competing with you during and after the termination of their employment. They can guard against the:

• solicitation and poaching of clients and or customer connection;
• solicitation and poaching of current employees;
• the disclosure of trade secrets and other types of confidential information; and
• general activity directly in competition with your business.

Not all restraint of trade clauses are created equally and this is nowhere more evident than in the case of non-competition and non-solicitation clauses. Ultimately, such clauses will only be enforceable if they protect a legitimate business interest, i.e. a non-competition clause that merely seeks to prohibit a former employee from working for a rival labour hire organisation is illegal and will be unenforceable.

Exclusive service clauses

Exclusive service clauses mandate that an employee provide services to you and only you during the life of your employment relationship.

Any and all restraint of trade clauses will be found to be invalid unless they are reasonable. This is of particular concern when dealing with exclusive service clauses because of their ability to limit an employee’s ability to earn a living. As such, it is essential that such a clause be drafted with sufficient particularity and also flexibility, otherwise it will be found to be unenforceable.

Garden leave clauses

Garden leave clauses allow you as the employer to exclude an employee from the workplace after the worker has been let go. Now I know what you’re thinking. How can a clause that allows me to prevent a worker from coming onto the business premises be classified as a restraint of trade clause? Well, by disallowing a former employee from accessing the work premises, you essentially prevent them from stealing confidential information, poaching clients or employees and undertaking activities designed to sabotage your work processes. As such the benefits of a garden leave clause cannot be overstated.

Conclusion

Restraint of trade clauses are an invaluable tool that allow labour hire companies to maintain a stable work force, grow their customer connections and securely protect their confidential information. Should you wish to obtain more information regarding the above, our team at LegalVision would be happy to assist you.