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As an employee, you may receive the opportunity to work for a competing business. In these circumstances, you should understand the obligations you may owe to your current employer during and after your employment. Understanding your obligation will facilitate a smooth transition to your new role. This article explains what you should consider before resigning to work for a competitor.

What Are Your Notice Requirements?

A notice period is the length of time you must give to your employer before ending your employment. The notice period will allow you to conduct a proper handover and influence when you can start working for your new employer. You can resign verbally, but it is best practice to provide a written resignation notice to your employer.

It is best practice to check if your employment agreement specifies the length of notice you need to provide to your employer before ending your employment. You should also consider if you are covered by a modern award or enterprise agreement. The relevant award or agreement may specify the minimum period of notice you must give when you resign. For example, the General Retail Industry Award 2020 includes the following table of notice periods.

Employee’s period of continuous service with the employerPeriod of notice
Not more than one yearOne week
More than one year but not more than three yearsTwo weeks
More than three years but not more than five yearsThree weeks
Five years or moreFour weeks

You may only need to provide reasonable notice to your employer before resigning if you:

  • are not covered by a modern award or enterprise agreement; and
  • do not have an employment agreement, or your employment agreement is silent about notice.

Reasonable Notice

The period of notice that is ‘reasonable’ depends on your circumstances. Factors that are relevant include:

  • your age;
  • the nature of your position;
  • your length of service;
  • your remuneration level; and
  • the amount of time it would take you to find similar employment.

For example, the reasonable notice period for a junior or less skilled employee is likely to be shorter than the reasonable notice period for a long-serving or highly skilled senior employee.

Modern awards or enterprise agreements may allow your employer to withhold wages if you give insufficient notice of your resignation. The award or agreement will often specify requirements for withholding payments, such as:

  • you must be at least 18 years old;
  • your employer can only deduct from wages owed to you and not from other entitlements;
  • a maximum amount your employer can deduct; and
  • the deductions cannot be unreasonable in the circumstances.

Does Your Employment Agreement Include Restraint Clauses?

Your employer may try to rely on any restraint clauses in your employment agreement to stop you from working for a competitor. The two main types of restraint clauses are:

  1. non-competition clause: attempts to restrict you from competing against your employer’s business or working for a direct competitor for a specified period in a specified area; and
  2. non-solicitation clause: attempts to restrict you from soliciting clients and staff from your employer.

The enforceability of restraints clauses depend on the wording of the clauses and the facts of your situation. The general rule is that restraint clauses are not enforceable by your employer unless it can be shown that:

  1. the clause protects a legitimate business interest of your employer;

Examples of legitimate business interests include:

2. the clause is reasonably necessary to protect your employer’s legitimate business interest; and

Examples of factors that are relevant when assessing the reasonableness of a restraint clause include:

  • the nature of the activities restrained;
  • your skills and experience;
  • the nature of the industry;
  • parties’ bargaining position;
  • the duration of the restraint; and
  • the geographic area of the restraint.

3. enforcing the clause would not be against the public interest in freedom of trade and competition.

Restraint clauses that unreasonably prevent competition or restrict your ability to apply your skills to earn a livelihood are unlikely to be enforceable.

Cascading Options

A restraint clause is often more likely to be enforceable if it includes cascading options. The court will choose the most reasonable option from the cascading clause and cross out the others. Below is an example of cascading options.

Restraint periodRestraint Area
(a) 12 months; (a) Australia;
(b) Six months; or(b) New South Wales; or
(c) Three months.(c) Sydney.

Other Post-Employment Obligations

Upon resigning, there are standard obligations that continue past the end of your employment. These post-employment obligations remain, regardless of whether you are resigning to work for a competitor or not.

Return of Property

When exiting a business, you need to return any business property or equipment in your possession. These include any:

  • documents and records;
  • keys;
  • passes;
  • mobile phones;
  • credit cards;
  • computers; and
  • vehicles.

Intellectual Property 

Your employer will generally own all intellectual property (IP) you develop during and in connection with your employment. Any IP accessed during your employment, like reports or templates, also remains your employer’s property. Other examples of IP include:

  • literary, musical or artistic works;
  • inventions;
  • computer programs;
  • processes; and
  • strategies.

Confidential Information

You are generally prohibited from disclosing or reproducing any confidential information obtained during your employment. Examples of confidential information include:

  • business plans;
  • client lists;
  • marketing strategies; and
  • company manuals.

Key Takeaways

You need to understand your notice requirements because it will affect when you can commence working for your new employer. Also, your current employer may be allowed to withhold wages if you provide insufficient notice when resigning. It is best practice to check if your employment agreement contains any restraint clauses that may prevent you from working for a competitor for a reasonable time and within a reasonable geographic area. You should also be aware of the obligations regarding business property, intellectual property and confidential information that extend beyond the end of your employment. If you have any questions about your post-employment obligations upon resigning, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

Can I resign from my current position and work for a competitor business?

Your ability to resign and work for a competitor will depend on any restraint clauses in your current employment agreement and whether they are enforceable. The two main types of restraint clauses are non-competition clauses and non-solicitation clauses.

How do I know if a restraint of trade clause is enforceable?

The enforceability of restraints clauses depend on the wording of the clauses and the facts of your situation. Generally, they are not enforceable. However, your employer can rely on them if doing so will protect their legitimate business interest, and it is reasonably necessary.

What are my post-employment obligations?

It is best practice to read through your employment agreement for any post-employment obligations you must uphold. Generally, you are obliged to return any business property to your employer. Additionally, any intellectual property you have used or created during your employment typically remains the property of your employer.

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