“Completely Untenable” – A Restraint of Trade Story

In recent months Courts have found decisions in favour of the Employer in relation to restraint of trade (ROT) clauses.

ROT clauses are notoriously difficult to enforce and the Courts will only enforce the restraint if it is reasonably practicable to protect the legitimate commercial interests of the business.
An ROT clause must be well drafted to have any chance of being able to be used to enforce a restraint and prevent an employee from “stealing clients” or using internal confidential information to set up a start up business.

In the decision of RNTT Pty Ltd v Constable [2014] (SADC) 78 the Court deemed the ROT to be enforceable and is likely to award a six figure sum in favour of the Employer. This decision was made against a Manager who it was found performed work for least two other companies whilst still in the employ of the Employer.

The evidence showed that the Manager was likely engineering a move to eventually set up his own business performing work for the other two companies. The employee was paid well in excess of $100,000 a year (plus car allowance). The other two companies were also clients of the Employer.

Judge Barrett said it was “completely untenable” for the Manager to perform work for clients whilst still employed (and in the Employer’s time) but on the basis of his own “business”.

Employers should ensure there are ROT clauses in their employment contracts, especially for staff that have regular access to confidential information such as Office Managers.

Written by
Jonathan Mamaril
Principal & Director, NB Lawyers – Employment Lawyers
07 3876 5111
[email protected]