Employers
Restraint of trade
You can only enforce a restraint of trade if there is a valid restraint of trade clause in the employee’s employment agreement.
When you can include a restraint of trade in an employment agreement
Restraint of trade clauses prevent former employees from working in similar businesses in a way that may affect your business.
You can include a restraint of trade clause in your employee’s employment agreement if they also agree to it. These clauses are designed to protect a business’ commercially sensitive information by restricting the employee‘s business activities when they finish working for you. They are usually limited to a specific geographical area and only last for a specific period after the end of the employee’s work.
2 main types of restraint of trade clause
The 2 main types of restraint of trade clause are:
- non-competition - where a former employee is prevented from working in a similar field to your business
- non-solicitation - where a former employee is allowed to take another job in the same or similar industry but is restricted from contacting your clients about their new business.
Using confidential information from a previous job
Even if an employee’s employment agreement did not contain a specific restraint of trade clause, you may be able to prevent them from using certain highly confidential information in a way that may affect your business.
What happens if an employee breaches a restraint of trade clause
If an employee breaches a restraint of trade clause or misuses confidential information, you may be able to apply to the Employment Relations Authority or the Employment Court for an injunction restraining the employee from continuing such activities.
You may also be able to ask for damages to cover any loss they may have experienced because of the breach, and penalties for the breach of contract or a breach of the duty of good faith.