Employment Contracts &
Restraints of Trade

Protect your People and your Business

Employment Contracts

An employment contract or agreement fundamentally covers the working relationship of an employer and an employee. A well drafted employment contract provides all parties with a clear understanding of their obligations and the terms of employment. It may sound surprising, but there is no obligation under the law to have a written contract of employment. 

However, a well drafted written employment contract or agreement provides certainty and removes ambiguity if there is a breakdown in the relationship between the employer and employee. A verbal or poorly drafted document invites disputes in relation to the terms and conditions of employment that can have unforeseen consequences for your business. For example, where there is no written contract there will likely be no clauses dealing with confidentiality or restraint of trade which could expose your business to significant losses and damages with no contractual provisions to rely upon.

Conditions of Employment

Choosing what to include and what to leave out of an employment contract can be a tricky exercise. Amongst other things, it should provide a clear outline of the employee’s classification, duties and responsibilities, remuneration, leave entitlements and may also deal with certain other important matters including: 

  • Confidentiality,
  • Ownership of intellectual property created during employment, and 
  • Post-employment restraints of trade and non-solicitation of clients and customers.

Contract Clauses

Employment contracts must not include clauses that are contrary to industrial laws or instruments as these will be unenforceable. The National Employment Standards and minimum entitlements cannot be contracted out of by employers and there are significant penalties for contraventions.  

Your employment contract may also refer to a Modern Award or Enterprise Bargaining Agreement. Modern Awards are legal documents that apply to over 100 industries that outline minimum rates of pay and conditions of employment. Employers cannot contract out of provisions of Modern Awards as they are minimum employment conditions nor can a Modern Award offer terms less favourable than the National Employment Standards.  

Restraint of Trade Clauses

A well drafted restraint of trade clause is the most effective way an employer can prevent a former employee from poaching their clients or staff, and using its confidential information. However, an employer needs to consider whether the “restraint” is reasonable to genuinely protect the employer’s goodwill and legitimate interests.  

Are Restraint of Trade Clauses Enforceable?

Any provision which imposes restrictions on an individual’s freedom to trade or be employed will likely be held to be illegal and unenforceable, unless it is proven that the restriction is reasonable having regard to both parties’ interests and the overarching public interest.  

To ensure that your business interests are protected, it is vital that your restraint of trade clauses are effective and enforceable. Your employment contracts should be reviewed periodically and updated when necessary to ensure the changing nature of your employee’s roles are reflected in the restraints of trade. In particular, should you decide to promote an employee, you should also consider the introduction of more substantial restraints to reflect the promotion and access to clients/customers and confidential business information.  

Employment Contract Recommendations for Employers

  • Speak with our employment lawyersto ensure that your contracts are drafted with clarity and precision. 
  • Obtain advice from our employment lawyersin respect of the protection of your confidential information, restraints of trade, overpayments and the management of staff behaviour and conduct. 
  • Regularly review and update your employment contracts/agreements.  

Restraint of Trade Recommendations for Employers

  • Ensure that all employees have restraintof trade clauses in their contracts. 
  • Consult with our employment lawyers on a regular basis to discuss the enforceability of the restraints of trade.
  • Speak with our office in relation to a “cascading restraintclause.” 
  • Closely monitor employees who have left your business and are subject to restraints of trade and consult with our office immediately if the ex-employee is in breach. 

Call to speak to an Employment Lawyer today.
We service Newcastle, Sydney and Central Coast.