Restraint of trade clauses are generally inserted in an employment agreement, whereby the employers attempt to protect their business interests and goodwill.

Before you sign your employment agreement, make sure that you have understood all clauses in the agreement, especially those regarding a restraint of trade. A restraint of trade clause in your agreement may have unfavourable consequences on your potential future employment or even on your ability to start your own business.

Your employment agreement may have few common restraint of trade clauses in it which includes:

Restraining you from working in an organisation who is a competitor of your former employer for a specific period of time and in a *Particular geographic area;

Restraining you as an ex-employee from disclosing confidential information to the competitor employer;

Restricting you from poaching or enticing any other employee’s to work in competition with your employer; and

Restricting you from approaching or assisting your old clients for a period of time and in a particular geographic area after your *Employment relationship has ended.

Restraint of trade clauses are enforceable on the employees up to a certain extent which is practically necessary in order to protect the employer’s legitimate business interest or to protect the reputation of the business. The employer needs to ensure that the enforcement of the restraint of trade clauses on the employee does not go further beyond the legitimate business interest of the employer.

The Court might not enforce the restraint of trade clauses on the employee if the Court finds that the employer has gone beyond its legitimate business interest.

The Court considers a number of factors before enforcing the restraint of trade clauses on the employee including:

The employer’s interests and their protection capabilities which include geographic locations of the employer and their business *Goodwill in the market and also the geographic locations of their clients;

Nature of work the employee is restrained from which includes the position and the job roles and duties of the employee and the *Level of interactions with the clients;

Scope and period of the restraint of trade clauses on the employee which also includes the geographic area the employer is *Proposing to be covered by the clauses;

Benefits to the employees from entering into employment agreements having restraint of trade clauses in it; and

The added advantage of negotiating powers the employees get by entering into such agreements.

At times, employment agreements may contain series of restraint of trade clauses, which may overlap with each other. In these cases, any clause which is found unreasonable and unenforceable can be severed and the employer can enforce the remaining clauses on the employees.

If you are an employee or an employer and would like to know more about restraint of trade clauses please feel free to contact our team of experienced lawyers.

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