Termination of Employment
If you are thinking of leaving your employer or have found yourself in a situation whereby your employment has been terminated, it is possible that your activities after the end of your employment may be restricted by the use of contractual terms known as restrictive covenants.
If you have knowledge of technology, strategic information about your employer’s business or customer contacts, you may be prohibited from using this knowledge for the benefit of your new employer or business, by restraining you from, for example, soliciting customers or poaching other employees of your former employer.
A contractual term (usually within your contract of employment) which restricts your activities after the termination of your employment will be void for being “in restraint of trade” and against public policy unless your former employer can show that:
- It has a legitimate proprietary interest that it is appropriate to protect; and
- The protection sought is no more than is reasonable having regard to the interests of the parties and the public interest.
Examples of legitimate interests are trade connections (with suppliers or customers), goodwill, customer lists and contacts, trade secrets and other confidential information.
If the employer has a legitimate interest to protect, it should not use a restriction which is wider than reasonably necessary to protect that interest.
Therefore, in order to be enforceable, the restriction i.e. not to work for a competing employer, should be limited in terms of the activities it restricts, the period during which the restriction is to apply and the geographical extent of its application.
If a former employer considers that you might be in breach of a restrictive covenant, it may apply to the Court for an injunction to restrain your behaviour or conduct, for example, by restraining you from using a customer list or sharing confidential information with your new employer.
Even if there are no restrictive covenants set out in your contract of employment, it is still possible for a former employer to obtain an injunction to restrain your actions, known as a “springboard injunction”, if:
- There has been unlawful activity (i.e. you have unlawfully used your former employer’s confidential material); and
- You have gained an unfair competitive advantage over your former employer; and
- The nature and period of the competitive advantage is more than “short term”; and
- The advantage still exists at the date the springboard injunction is sought and will continue unless the injunction is granted.
It is a very serious matter for a Court to grant an injunction to restrain your actions.
If your former employer is successful in obtaining the injunction, this is highly likely to cause serious difficulties for you in terms of you being ordered to pay your former employer’s costs of getting the injunction, ceasing your ongoing activities and potentially jeopardising your current employment/business activities.