Restraint Of Trade
Employers may consider the inclusion of a restraint of trade clause in their employment agreements as a safeguard against employees leaving their employment and using this sensitive information to the former employer’s detriment.
What Is A Restraint Of Trade Clause?
A restraint of trade clause is designed to protect a business’s sensitive information to which its employees may have access. The most common conditions in restraint of trade clauses tend to prohibit or limit an employee from working in a certain field of expertise, in a designated geographical location and/or for a specified period of time.
An employer considering the inclusion of a restraint of trade clause within an individual employment agreement is advised to consider offering the employee consideration (such as an increase in wages or salary) given the imposition the employee may face, if a restraint of trade clause is sustained.
Practicalities To Consider
A restraint of trade clause does not automatically protect an employer. The Courts take a careful approach when making determinations about restraint of trade clauses, and often deem restraint of trade clauses unenforceable from the outset.
Where a dispute arises, the Courts examine all aspects of the restraint of trade clause – paying particular attention to whether the conditions are reasonable in order to protect the employer’s interests, relative consideration or compensation, as well as the reasonableness and practicality of the conditions imposed upon the employee.
The Courts may consider the following factors when considering the enforceability of a restraint of trade clause:
Before considering inclusion of a restraint of trade clause, it is vital to understand:
Restraint of trade clauses can be very beneficial for employers, especially if a business is reliant on securing and safeguarding its interests critical to the successful running of the business. It is essential to understand all aspects of a restraint of trade clause before relying on one to protect your business, as finding the right balance in a restraint of trade clause is vital to ensure that it is enforceable. As a specialist commercial law firm, we regularly advise clients on matters such as this, and would welcome the opportunity to assist you in this area.