Restraint of trade clauses
The secret of a good restraint of trade clause lies in its ability to strike the right balance between the employer’s rightful interest in protecting its business against competitors who acquire inside knowledge, and employees’ interests in safeguarding their earning power when they leave the company.
The right balance
A carefully formulated restraint of trade clause greatly reduces the risk of a dispute between an employer and one of its former employees. It makes clear to the employee that he or she cannot work for a direct competitor of his or her former employer before a certain period of time has elapsed. Likewise, the employer is made aware that former staff depend on their training, skills and experience in order to find a new job and that they will naturally tend to look for new work in a similar line of business.
Although it is vital to word a restraint of trade clause in the right way, any clause that does not comply with the law is simply null and void. Sound advice is therefore essential.
For example, if you are planning to insert a restraint of trade clause in a fixed-term contract of employment, one of the statutory requirements you need to meet in order for the clause to be valid is that you include a written description of the critical business or departmental interests that merit the inclusion of the clause. If such an explanation is not provided in a fixed-term employment contract, the clause is automatically null and void. And if the explanation is unconvincing, the clause will simply not stand up in court.
Why should you contact our employment law lawyers?
With both court judgments and the law itself constantly on the move, sound legal advice is of the essence. Advice on restraint of trade clauses – and disputes involving them – is one of our specialities!
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