What Happens if I Breach My Restraint of Trade Clause?

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Table of Contents

• Breaching a Restraint of Trade
• If the Restraint is Upheld
• What Can Your Employer Do?
• How Does the Court Interpret Restraint of Trade Clauses
• Conclusion

So, you’ve gone and got yourself a brand spanking new job. It’s great pay and conditions. You can’t wait to hand in your notice and start this exciting new chapter. The only problem? Your great new job is with a competitor of your current employer. And your current employment agreement, well, it contains a restraint of trade clause. And you’re pretty confident some of your clients want to come with you.

Breaching a Restraint of Trade

In the excitement of transitioning into a new role at a new company, you may think that breaching that restraint clause won’t really affect anything, right?

Wrong. Before handing in your notice and accepting the offer, it is critical that you take steps to understand your legal rights and obligations. If you don’t, you could face very serious consequences.

If the Restraint is Upheld

If the restraint is upheld (and that is a big if) and you breach the clause, you can find yourself subject to an injunction or even a judgment for damages in favour of your former employer.

For example, imagine you are a financial planner. You have been in your current role for six years. During this time, you built up a good client base and a number have indicated that they will come with you if you jump ship (in off the record discussions, of course).

So you do. You change your LinkedIn profile, maintain your mobile number (which most of your clients have), and welcome them with open arms when they contact you and ask to come across to your new role.

If you are subject to a restraint preventing you from working in any capacity for a competitor of your former employer, you could be in some serious trouble. It is necessary to carefully read the clause as it may, usually by way of a separate sub-clause, prevent you from working with your former employer’s clients within a specified area and time.

What Can Your Employer Do?

Here, your former employer could seek an injunction to prevent you further breaching the restraint as well as damages. Damage calculations reflect the profits that you would have derived from your former employer’s clients (an account of profits). The Court may also award ancillary damages. Additionally, if the restraint is upheld against you, you will not only have to pay your own legal fees, but also those of your former employer.

How Does the Court Interpret Restraint of Trade Clauses

But all is not lost. Your former employer’s ability to enforce this clause and their likelihood of success is entirely dependent on the reasonableness of the restraint in the circumstances. The overarching consideration is whether the restraint is required to protect your former employer’s legitimate business interests. The Court will look at, among other things:

• The nature of the role,
• Level of remuneration,
• Level of client interaction, and
• The extent the restraint stops you working in your field of expertise.

An employment lawyer can step you through how these factors apply to your situation, and advise you of the commercial measures you should adopt.

Conclusion

In short, restraints can and are upheld, depending on the circumstances of each case. LegalVision’s experienced employments lawyers can review your employment agreement and advise you on how the restraint clause operates in a variety of industries and roles. Questions? Please get in touch on 1300 544 755.