Read between lines of employment contracts
EMPLOYEES must check their contract for any restrictions on their future employment and deal with any clauses they believe are unfair before they sign.
The warning from Adelaide commercial law firm Kelly and Co comes as South Australian businesses become more aggressive in enforcing legal restrictions on employees who leave the company.
Commercial workplace relations lawyer Clare Raimondo says the tight labour market and highly competitive business environment mean more companies are prepared to sue former staff who break post-employment restraints in their contracts.
A post-employment restraint often is written into contracts to restrict an employee from taking confidential information, clients and other staff with them to a rival firm or when establishing their own business.
It also usually prevents those employees from competing against their former employer by banning specific activities for a specified length of time and geographical area.
‘‘As an employee, it would pay to address any perceived unfairness before you sign the contract rather than wait for it to surface when you move on,’’ Ms Raimondo says.
‘‘Any new employer should also be aware of the pre-existing contractual obligations of an incoming staff member to help avoid being caught up in any legal action by the old employer.’’
Ms Raimondo says employees and employers need to be aware of the restraints to avoid costly legal action, with courts appearing to harden their views on upholding the restraints. ‘‘We have seen far more litigation around this issue in recent years,’’ she says. A common mistake for employers, she says, is to make the clauses unreasonably restrictive and suggests carefully drafting them to ensure they are legally enforceable.
‘‘We have seen cases where employers have looked to include a clause which stipulates the departing employee cannot work in the same industry anywhere in the world for three years,’’ she says.
‘‘This would obviously test the definition of reasonable in the eyes of a court and is extremely unlikely to be upheld.’’
A recent high-profile example of a post-employment restraint case occurred when former Seven Network chief sales officer James Warburton lost his appeal to start work immediately as chief executive officer at Network Ten.
Seven issued proceedings to force a post-employment restraint, which was upheld by the court and stopped Mr Warburton working for about nine months.
Ms Raimondo says the decision reinforces the importance of properly drafted postemployment restraints.
‘‘They have shown to be effective in preventing senior employees from exploiting sensitive or confidential information to compete with a former employer,’’ she says.
James Warburton could not work for nine months when Channel Seven issued proceedings to force a post-employment restraint.