By Paul O'Halloran

Employers in the transport industry often ask us if they can prevent an employee from working for a competitor after the employee resigns. While it depends on the facts of each individual case, a carefully considered and drafted restraint of trade clause in a contract of employment may achieve this outcome. Unfortunately, most clauses we see are invalid and unenforceable because they have not been properly considered at the time of entering into the contract.

The recent Victorian decision of Wallis Nominees (Computing) Pty Ltd v Matthew William Pickett [2012] VSC 82 demonstrates the limits of restraint of trade clauses and the consequences of poorly drafted clauses. In that case, the employee (Pickett) was employed by Wallis Nominees as an IT specialist. Pickett had a contract of employment restraining him from providing certain services to clients of the Wallis Nominees within 12 months after ceasing employment with Wallis Nominees.

During his employment Pickett was offered and accepted an IT job with a client of Wallis Nominees for whom Pickett had been providing certain IT services on behalf of Wallis Nominees. When Pickett resigned to take up the job Wallis Nominees brought legal action in the Supreme Court of Victoria. Wallis Nominees alleged that Pickett had breached the restraint of trade clause in his contract of employment by accepting a job with a client performing similar IT services to those performed at Wallis Nominees.

The starting point for a restraint of trade clause is that it is void as against public policy unless the employer can prove a legitimate business interest deserving of special protection. The Supreme Court of Victoria held that Wallis Nominees could not enforce the restraint of trade clause in this case because it was invalid and unreasonable for the following reasons:

  • First, Pickett was not considered by the judge to be at risk of exploiting the customer connections of Wallis Nominees because he was not the "human face" of that business and did not have the relevant control over the business of the client to enable such exploitation. The skills and experience Pickett had gained while working for Wallis Nominees did not constitute a legitimate business interest that Wallis Nominees could protect by the restraint.
  • Secondly, the length of the restraint clause (12 months) was too long because it was longer than Wallis Nominees needed to find an effective replacement for Pickett. As such, the clause was unreasonable.

Restraint of trade clauses need to be considered at the start of employment, not the end. Employers wishing to rely on enforceable restraint of trade clauses in contracts of employment should contact Rigby Cooke Lawyers' Employment Law & Workplace Relations team for further advice.

Chain of Responsibility

The chain is only as strong as its weakest link

In the press recently, some leading and well known transport companies have come under scrutiny and investigation regarding alleged tampering with speeding devices on their heavy vehicles.

The investigations will be far reaching, extensive and all pervasive, and unfortunately will not stop at the operators concerned. The whole notion of Chain of Responsibility means that as part of any investigation, all persons in the supply chain can and possibly will be investigated. In summary, the chain will only be as strong as its weakest link.

What this reinforces is the critical need for all transport operators and all persons/organisations up and down the supply chain who have dealings with them, to have established and "live'' Chain of Responsibility processes and procedures which can be relied upon, and if necessary produced, in support of a "reasonable steps" defence.

Rigby Cooke Lawyers are currently involved in a number of Chain of Responsibility audit processes for our clients, part of which includes assisting our clients with the roll out and implementation of the necessary Chain of Responsibility reviews, policies and procedures, and checking that their contracts for the supply of transport services are compliant and afford the necessary protections.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.