RESTRAINT OF TRADE CLAUSES

WHAT IS A RESTRAINT OF TRADE?

• The aim of a restraint of trade clause is to stifle competiton from ex-employees. The clause must be reasonable.

WHAT IS REASONABLE?

• Assessed by a two stage test:
• 1) is there a legitimate interest to protect?
• 2) is the wording of the clause appropriate?

1) LEGITIMATE INTEREST

• Also known as protecting a business interest.
• 1- seek to prevent disclosure of confidential information.
• 2- seek to prevent the employee making use of the employers trade connection.

HOW IS REASONABLENES DETERMINED?

• Reasonable in terms of the market that the parties operate
• In terms of time
• In terms of area covered
• Public policy

COMMON TYPES OF RESTRAINT CLAUSES

• Non- competition restraints
• Non- dealing restraints
• Non- solicitation restraint
• Non- poaching restraint

CONSEQUENCES

• Injunction
• Search orders

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