Legal Comment by Mark Illidge

August 2006

Most employers are faced with the dilemma of how to adequately protect any of their trade secrets, intellectual property and confidential information gained by an employee during the course of employment.  Issues usually only arise after the employment relationship has ceased.

The standard post-employment restrictions contained in employment contracts deal with:

· Geographical and time limitations on where the former employee may work; and
· Non-disclosure to others of the confidential information gained during employment.

The most common issue arising is the enforceability of the provision providing that upon termination of employment the employee shall not compete against the employer.

In deciding whether a restraint provision is reasonable and enforceable the courts consider;
· whether the provision is unduly restrictive of a person's ability to contract freely; and
· whether the provision is contrary to the public interest.

In considering what is reasonable from the point of view of the employee and in the public interest the restriction imposed must not extend beyond anything which is sufficient for the adequate protection of the party sought to be protected. A provision which goes beyond what is adequate is likely to be contrary to the operation of a competitive free-market and therefore not enforced by the courts.

In order to avoid doubt about the reasonableness and enforceability of the restraint provision, lawyers draft the restraint clause in a cascading manner.  For example, if there's doubt about the extent of any geographical limitation the clause could be phrased to cover all of southeast Queensland, then in the alternative all of the Sunshine Coast, and then in the alternative all of the Sunshine Coast Hinterland.  This way the unenforceable provision may be severed and not affect the parts of the clause which may be held to be reasonable and enforceable.

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