You have every right to protect the interests of your business. And a restraint of trade agreement will help you do this. But you can't just include anything you like in it! If you land up in court, they'll only enforce it if it's 'reasonable'.
Use these 5 rules to make sure yours holds up in court...
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5 Rules to make your restraint reasonable
Rule #1: Prove your interests are worthy of legal protection
Your information must be truly confidential and you must have a protectable interest.
4 interests you could protect with a restraint agreement:
1. Trade secrets and other confidential information;
2. Special methods of doing business;
3. Trade connections with customers and suppliers; and
4. Reputational value and client relationships.
Rule #2: Only make your restraint enforceable for a reasonable period of time
Even if you have a protectable interest, the court will check the restraint doesn't go further than necessary to protect your interest. It will balance your interest against that of the employee not being unreasonably restrained.
If the court feels the restraint's unreasonably broad or you've applied it for too long, it can reduce it and order you to enforce it in part.
Keep reading for the next 3 rules…
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Rule #3: Pay your employee to help enforce the restraint
The court will consider if you paid the employee a lump sum payment in return for his agreement to the restraint. You don't have to pay this amount, but it will strengthen your case.
Rule #4: Include a clause where the employee accepts the restraint's necessary and fair
Your agreement must include a clause where he agrees in advance the restraint's fair and necessary. This doesn't mean the judge will find in your favour. He'll be aware that inequality of bargaining power might make the employee accept the agreement as fair, even when it's obviously not.
Rule #5: Take care not to dismiss your employee unfairly
The fact that you unlawfully or unfairly dismissed the employee doesn't necessarily mean the court won't enforce the restraint, but it may count against you.
You'll also have to prove your ex-employee threatens your business interests
To win your case, you'll also have to satisfy the court that the employee's threatening the interests of your business. So there you have it… Want to find out more?
The HR Policies and Procedures have all the forms you need to enforce in your company today…