You are expected to uphold certain agreements when entering a new company and signing its contracts. In certain cases, that agreement can be a non-compete clause. You may find this referred to as a restraint on trade clause on your contract. Employees must know what a non-competence clause entails and requires them to uphold and whether or not it is reasonable. The expertise of employment lawyers in Perth can help clarify this. Meanwhile, this article covers all the know-how of a non-compete clause and how it operates in Australia.
As the name suggests, a non-compete clause is a measure or a clause that prevents competition in a field of business. In other words, when you sign an agreement to this clause, you are contractually bound not to enter or begin a similar profession, business, or trade that can compete with your current employer's business or trade. In Australia, a non-compete clause is only enforceable under the court's permission for causes that it deems reasonable.
It essentially prevents the replication and stealing of intellectual property and confidential information regarding one profession or business to establish another business. A non-compete clause helps prevent the theft and misuse of intellectual property or private information, including financial information, statistics, databases, or business processes.
The court may consider several factors when considering how reasonable a restraint or non-compete clause is. These can be:
The activities that the restraint clause seeks to check or control
The geographical location around which the restraint applies
The time for which the restraint seeks to operate
Once these factors are decided upon, the court will balance and measure restrictions against the enforcing party's competition.
As a restraint clause, the non-compete operates in various ways to prevent employees from misusing, leaking, or replicating classified information, trade secrets, and intellectual property. This can be enforced in various types of contracts. Here are a few examples of how they can be enforced:
Franchising Contract: A franchisee or manager running a restaurant may be disallowed to establish another competing restaurant within a certain radius of the original franchise's location.
Employee Contract: An employee working in the public relations department of a company may be disallowed to enter into a similar public relations role in a competing company in their future jobs for 6 months.
Manufacturing Contract: A manufacturer of a certain makeup product may be disallowed to manufacture similar products for another company or brand.
Business Sales Contract: An operator of an accounting business may be disallowed to be the vendor of a new accounting business for a stipulated period after the business is sold.
If you feel the restraint clauses enforced have room for questions or clarifications, consulting the best corporate lawyers Adelaide can guide you through your rights and alternatives.
A non-compete clause, while striving to quell competition in the market of a specific business, must necessarily have genuine causes driving the restraint. The party wanting to enforce the restraint must prove that the interests that it seeks to protect are valuable. For a business, these can be:
Trade secrets
Intellectual property
Classified information
Financial information
Business know-how
Goodwill
Trade secrets are worth their weight in gold for any business, giving them an edge. These can be:
Unique formulas
Manufacturing technology
Methods and recipes
The process of operation
No matter what a trade secret might be, they are confidential and are completely owned by the business that makes or uses them. To know whether your business qualifies for non-compete clauses, seek the expertise of the best employment lawyers Adelaide, who can provide you with a personalized assessment.
There are various pros and cons to having restraint clauses, especially non-compete clauses. While they are important and effective tools for safeguarding intellectual property, trade secrets, and confidential information foundational to a business, too many restraint clauses can backfire on the business.
This is because it is a natural response of people to resist too many contrasts to what they are allowed to do. Too many restrictions can deter employees and clients from dealing with a business.
To find the perfect balance that protects the interest of your business and grants your clients and employees enough autonomy, you can contact the best corporate counsel lawyers Perth to guide you.