{"id":26079,"date":"2022-10-15T02:16:31","date_gmt":"2022-10-15T02:16:31","guid":{"rendered":"https:\/\/rmolaw.com.au\/restraint-of-trade\/"},"modified":"2025-02-24T05:12:29","modified_gmt":"2025-02-24T05:12:29","slug":"restraint-of-trade","status":"publish","type":"post","link":"https:\/\/rmolaw.com.au\/zh\/restraint-of-trade\/","title":{"rendered":"Restraint Of Trade"},"content":{"rendered":"<p>Protecting the goodwill and brand of the business whilst creating income and profit are the main objectives of all businesses. In an attempt to achieve these objectives business owners will often include restraint of trade (\u201c<strong>ROT<\/strong>\u201d) clauses in employment agreements, partnership agreements and business sale agreements.<\/p>\n<h2>What Are Restraint Of Trade Clauses?<\/h2>\n<p>Restraint Of Trade (ROT) clauses are used by employers to attempt to prevent:<\/p>\n<ul>\n<li>current or former employees or partners from using the trade information obtained in the course of their employment for their own benefits,<\/li>\n<li>\u2018snatching\u2019 existing clients, or<\/li>\n<li>competing with the business for a period of time within a specified geographic area\/territory.<\/li>\n<\/ul>\n<p>The effect of a valid ROT clause is that the employee is restrained from taking certain action, which may include, but not limited to:<\/p>\n<ul>\n<li>engaging in alternative employment with another employer during the term of the employment,<\/li>\n<li>soliciting the company\u2019s clients once employment has ended,<\/li>\n<li>disclosing confidential information post employment, and<\/li>\n<li>poaching\/soliciting of other employees to work in competition with the employer.<\/li>\n<\/ul>\n<p>ROT clauses are also used by business buyers to restrain the seller from starting up or trading in a competing business immediately after the business sale.<\/p>\n<h2>Courts Attitude On Restraint Of Trade<\/h2>\n<p>Courts will only enforce ROT clauses if they are deemed reasonable.\u00a0 However, previous cases show the courts are often reluctant to enforce ROT clauses.<\/p>\n<p>The courts have, from time to time, pointed out that any restrictions on trade can only be justified if it is reasonable in the interests of the parties concerned and reasonable in the public interests.\u00a0 In other words, whilst adequate protection should be afforded to a party to protect genuine business interest, such protection must not at the same time be adverse to the public.<\/p>\n<h2>What To Look Out For In A Restraint Of Trade Clause<\/h2>\n<p>The mere presence of a Restraint Of Trade clause in any contractual document does not make it enforceable.\u00a0 Whether or not a clause is enforceable depends on a number of factors:<\/p>\n<p><em>(a) Genuine and legitimate interests<\/em><\/p>\n<p>For a restraint to be reasonable there must be a genuine and legitimate interest that needs protection and the restraint should be limited to protecting that interest.\u00a0 The ROT clause must not be too broad by preventing the party being restrained from working at all or having any non-employment involvement (such as share holding) in another company which competes with the employer.<\/p>\n<p>Further, consideration should be given as to whether there are other existing competing businesses in the area.\u00a0 If there are, the restraint may be deemed to restrict the person\u2019s competition in the area rather than protecting any legitimate interest.\u00a0 Such restraint will have little justification in public interest.<\/p>\n<p><em>(b)\u00a0Nature of the business and clientele<\/em><\/p>\n<p>It is important to have a properly drafted restraint clause which takes into account the standard practice of the relevant industry.\u00a0 For example, for\u00a0a business that\u00a0does not engage with a regular and recurring client base, a restraint which purports to prevent or limit an employee\u2019s contact with previous clients of the business is unlikely to be reasonable.<\/p>\n<p>However, if the person has a high level of contact with recurring clients and the business is dependent on such contact being made, it may be reasonable for a restraint to be placed to prevent soliciting of clients after the employment has ended or after a business sale.<\/p>\n<p><em>(c)\u00a0Nature of the restrained party\u2019s role and exposure to confidential information<\/em><\/p>\n<p>Protecting trade secrets and confidential information is essential to ensure the continuing success of any business.\u00a0 In appropriate circumstances, it may be reasonable to restrain a former employee who had knowledge of confidential information in his\/her employment term from disclosing the information if the disclosure of such information to competitors will be detrimental to the business.<\/p>\n<p><em>(d)\u00a0Scope and duration of the restraint<\/em><\/p>\n<p>A ROT clause will only be deemed reasonable if a limit is set for the geographical area and the duration of the restraint.\u00a0 In general, the restraint should not cover a geographical area that is larger than necessary to protect the business interests while the period of restraint should not be for a time period that is longer than necessary to protect the business interest.<\/p>\n<p>Care should be taken when incorporating \u2018standard\u2019 ROT clauses into any agreement.\u00a0 Properly drafted ROT clauses can be helpful in protecting genuine business interests.\u00a0 It is important for businesses to identify precisely what interests that the owners wish to protect, in what area and for what time and ensure the restriction of trade is limited to that.\u00a0 It is advisable to seek legal advice to ensure any ROT clauses you have in place are likely to be enforceable.<\/p>\n<h3>How We Can Help<\/h3>\n<p>Our Lawyers are experienced working with business owners to develop accurate, effective and enforceable restraint of trade clauses across a range of agreements, such as employment agreements, partnership agreements and business sale agreements, which protect our client\u2019s business interests.<\/p>\n<h3>\u8054\u7cfb\u6211\u4eec<\/h3>\n<p>Get the best representation. Contact our expert Lawyers on\u00a0<a href=\"tel:1800999529\">1800 999 529<\/a>, email\u00a0<a href=\"mailto:mail@rmold.newwebsite.live\">mail@rmold.newwebsite.live<\/a>\u00a0or submit an enquiry below.<\/p>\n<p>We are available to meet with you at any of our local offices (<a href=\"https:\/\/rmolaw.com.au\/zh\/contact-us\/\">Brisbane, Gold Coast, Beenleigh, Cleveland and Jimboomba<\/a>) or by telephone or video-conference.<\/p>\n<p><em>This article is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.<\/em><\/p>\n<p><em>This article was originally published on the 30<sup>th<\/sup> of January 2017. It was last updated on the 15<sup>th<\/sup> of October 2022. <\/em><\/p>","protected":false},"excerpt":{"rendered":"<p>Protecting the goodwill and brand of the business and creating income and profit are the main objectives of all businesses. In an attempt to achieve these objectives business owners will often include restraint of trade clauses in employment agreements, partnership agreements and in business sale agreements.<\/p>","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[1],"tags":[],"expertise":[302],"class_list":["post-26079","post","type-post","status-publish","format-standard","hentry","category-uncategorized","expertise-corporate-business-lawbusiness-disputesemployment-law"],"acf":[],"_links":{"self":[{"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/posts\/26079","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/comments?post=26079"}],"version-history":[{"count":2,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/posts\/26079\/revisions"}],"predecessor-version":[{"id":28234,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/posts\/26079\/revisions\/28234"}],"wp:attachment":[{"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/media?parent=26079"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/categories?post=26079"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/tags?post=26079"},{"taxonomy":"expertise","embeddable":true,"href":"https:\/\/rmolaw.com.au\/zh\/wp-json\/wp\/v2\/expertise?post=26079"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}