A Former Employee Is Breaching Their Restraint of Trade
You invested in an employee, gave them access to your clients, your pricing, your systems and your strategy. Now they have left and they are competing directly, soliciting your clients or working for a competitor in breach of their restraint. Every day that passes without action, the damage compounds. Enforcing a restraint of trade requires urgent legal action - typically an interlocutory injunction - and the courts expect you to move quickly. Delay can be fatal to an injunction application.
What You Need To Know
Restraint of trade clauses in employment contracts are enforceable in Australia but only to the extent that they are reasonable. Reasonableness is assessed by reference to the duration, geographic scope and the activities restrained.
Many restraint clauses are drafted in cascading form (e.g. 24 months, then 18 months, then 12 months) so that if the maximum period is found unreasonable, the court can read down to a shorter period that is enforceable.
The primary remedy for breach of a restraint is an interlocutory injunction - a court order preventing the former employee from continuing the restrained conduct until the matter is finally determined.
To obtain an injunction, you must show there is a serious question to be tried (the restraint is likely enforceable and is being breached) and that the balance of convenience favours granting the injunction. Damages must be an inadequate remedy.
Delay in seeking an injunction can be used against you. If you become aware of the breach and do nothing for weeks or months, the court may infer the matter is not sufficiently urgent to warrant interlocutory relief.
Non-solicitation clauses (preventing contact with your clients) are generally more readily enforceable than broad non-compete clauses, because they protect a legitimate interest without preventing the person from working entirely.
What To Do Right Now
Document the breach
Gather evidence of exactly what the former employee is doing. Are they contacting your clients? Working for a named competitor? Setting up a competing business? Screenshots of LinkedIn activity, emails from clients reporting contact, evidence of the new role. Be specific.
Review the restraint clause carefully
Locate the employment contract and identify the exact terms of the restraint. What activities are restrained? For how long? In what geographic area? Does it include non-solicitation, non-compete or both? Is it in cascading form?
Act quickly
Delay undermines an injunction application. The court expects applicants to move promptly once they become aware of a breach. If you wait, the court may conclude the breach is not causing serious harm or that damages would be an adequate remedy.
Send a cease and desist letter
A formal letter putting the former employee on notice of the breach and demanding they cease the restrained conduct is usually the first step. It also establishes the date from which they were on notice. Sometimes a letter is sufficient to stop the conduct.
Prepare for an injunction application if needed
If the letter does not resolve the matter, you will need to apply to the court for an interlocutory injunction. This requires affidavit evidence, a draft order and legal submissions. A litigation lawyer can assess the enforceability of the clause and the strength of the application.
How We Can Help
We act for employers enforcing restraint of trade clauses against departing employees and competitors. We send cease and desist correspondence, apply for interlocutory injunctions in the Queensland Supreme Court and Federal Court and pursue damages for breach of contract. We also advise on the enforceability of restraint clauses before disputes arise and draft restraint provisions for employment contracts.
Delay weakens your injunction application. Act as soon as you become aware of the breach.
Don't wait until your options narrow.
We can usually assess your position within a single consultation. Call us or send an enquiry and we will get back to you promptly.