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Restraints of Trade

The Employment Relations (Restraint of Trade) Amendment Bill had its first reading on 26 July 2023 and submissions to the Select Committee on this Bill closed on 18 September 2023. Under the Bill, an employer will only be able to enforce a restraint of trade where the following apply:

  • The employee is paid at least THREE TIMES the minimum adult weekly rate (currently $905/week).

  • The employer pays the employee "reasonable compensation" for the restraint - and this must be at least half of the average weekly earnings of the employee for each week that the restraint applies.

  • The restraint is for six months or less (after which it will be unenforceable).

The Bill gives guidance on what a reasonable restraint of trade might be and how much an employer should compensate the employee for the restraint. It is important to note that when challenged in Court, restraints of trade that are found to be unreasonable are often deemed to be unenforceable. The onus is on the employer to show the restraint is reasonable and necessary to protect the employer's proprietary interests. In considering reasonableness an assessment will include:

  • The geographical area to which the restraint applies;

  • The length of time for which the restraint applies;

  • The type of work the employee does; and

  • The employee's remuneration

Where a restraint is "applied" in an employment agreement and there is no genuine reason, including no real compensation for that restraint, it is likely to be deemed unenforceable. The Bill, if passed into law, may provide some certainty to employers, but will come at some cost. For those who are interested, the bill can be accessed here.

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