Up until the last couple of years, former employers experienced difficulties enforcing restrictive covenants on employees post separation, irrespective of whether the former employee had resigned, been terminated or their position made redundant.

However, some recent high profile cases have demonstrated a willingness for Courts to enforce the terms of post employment restraints on ex-employees at least to the point where they will ensure the protection of the legitimate interests of the former employer.

In Seven Network (Operations) Limited & Ors v James Warburton (No. 2) [2011] NSWSC 386, the Supreme Court of NSW granted an application by the Seven Network seeking to restrain its former Chief of Sales from commencing new employment with the Ten Network. The Court accepted that the Seven Network had legitimate interests that should be protected by the restrictive covenants under Mr Warburton's employment contract with the Seven Network, but the Court did not apply the maximum restraint under the terms of the employment contract.

For employers seeking to rely on restrictive covenants, there are some important actions to undertake at different stages of the employment relationship.

Development of post employment restraints

When seeking to develop post employment restraints, an employer should:

• Incorporate the key terms in an employment contract signed by the employee
• Ensure the terms of the restraints are designed to protect the legitimate interests of the employer relevant to the departure of that particular employee
• Identify appropriate restraints, which can relate to employment or other relationships with (or as) a competitor, soliciting other employees to work with a competitor, soliciting suppliers or customers to change their dealings with the employer and unauthorised use or disclosure of the employer's confidential information and intellectual property
• Ensure the wording of the restraints are clear and provide for cascading scoping provisions for time and geography of the restraints.

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Source: Mondaq

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