Cessation of employment can occur due to many reasons, but a termination of employment does not imply that the employment contract entered into, is rendered meaningless or has come to an end.

Before signing an employment contract, it is recommended that you carefully read through the post-employment restraints and any termination clauses. These clauses can potentially have a long-standing impact on your future decision-making ability and career decisions.

If you’re unsure of what the clauses entail, we recommend speaking to an employment lawyer.

post employment restraint


Types of Post-Employment Restraints

Confidentiality Clause in Employment Contract

Confidentiality clauses restrict an employee from discussing or disclosing any information or knowledge which the employee may become aware of during the course of employment. This could include things like trade secrets or client information.

The restriction is applicable both during the period of employment and after the cessation of employment. If an employee discloses such information while employed, it can lead to a dismissal. And if they disclose information once the employment has ended, the employer is entitled to take legal action.

The Court Considers Information to be Confidential:

  • If the information is of immense value to the employer for conducting the business;
  • If the employer had spent considerable amount in research and development in relation to the information;
  • If the information is restricted to the people involved in the employer’s business only;
  • To the extent to which the information is known inside the business; and
  • If the employer had taken sufficient measures to safeguard the secrecy of the information.

Restraint of Trade Clause in Employment Contract

To prevent the leakage of any confidential information, the employers may also include a restraint of trade clause in the employment contract. This type of post-employment restraint can:

  • Prevent an employee from working for a competitor for a definite period of time or within a defined geographical area
  • Prevent an employee from starting their own enterprise dealing with almost similar business idea

This post-employment restraint clause is also called a non-competition or a non-compete clause.

Enforcing a Restraint

The enforceability of the post-employment restraint clauses depend upon whether they are necessary to protect the employer’s legitimate business interests. The entire employment contract will be judged contextually to decide whether such clauses will be considered to be enforceable.

As a general rule, the clauses cannot simply be provided for limiting competition or maintaining the employer’s competitive advantage in the market. The Fair Work Commission is specifically responsible for dealing with unfair dismissal and unlawful termination applications.

Absence of Written Employment Contract or Confidentiality Clause

It should also be borne in mind that the absence of a written employment contract or a confidentiality clause will not stop the Court from reading an implied responsibility of maintaining confidentiality on part of the employee. There is a mutual obligation of maintaining a relationship of trust, and both the employer and employee should endeavour to uphold it.

Recently, in the cases like Pearson v HRX Holdings Pty Ltd [2012] FCAFC 111 and OAMPS Gault Armstrong Pty Ltd and Anor v Glover and Anor [2012] NSWSC 1175, the Court upheld the non-compete clauses in the employment contracts. The decisions reinforce that Courts will favourably enforce non-compete clauses to protect the employer’s interests and prevent ex-employees from joining competing organisations, apart from the intention of protecting confidential information.

Executive Employment & Post-Employment Restraints

Executive Confidentiality

The protection of confidentiality gains importance in the matter of executive employees. This is because they are privy to most of the business decisions and have access to intellectual property of the business as well.

Thus, the confidentiality clauses in executive employment contracts should be drafted in such a way so as to assert ownership of the employer’s confidential information and intellectual property. If you need assistance with this, please don’t hesitate to get in touch with one of our commercial lawyers.

An executive is under a duty not to disclose confidential information obtained during the course of employment. This obligation arises out of an expressed or an implied term in the employment contract.

Executive Restraint of Trade

Similarly, a non-competition clause should prohibit the executive from pursuing their employer’s clients, customers, suppliers and employees for a definite period and within a specified geographical area after cessation of employment.

Owen Hodge Lawyers are Here to Help

Our employment lawyers in Sydney are experienced in dealing with employment law related issues. In case you are seeking legal advice to negotiate your employment contract favourably or you are keen to have your contract evaluated in the light of employment termination clauses, please feel free to contact our team of experts.

They can also provide answers to any questions about employment contracts and awards, enforcing a restraint, non compete clause redundancy and more.

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