Many employment contracts contain provisions known as restraints of trade. Classically, restraints of trade are clauses that prohibit conduct both during and after the employment relationship has ended with a view to protecting the interest of the employer.
Restraints of trade are particularly prevalent in the professional services industry where employees develop long standing relationships with clients, which in turn makes it likely the client will follow them where the employee moves to new employment or establishes their own firm.
Restraints of trade are prima facie unlawful but may be permitted if they do no more than protect the legitimate interest of the employer.
Restraints of trade are costly to enforce and challenge but that the consequences of ignoring them can be devastating.
Proceedings concerning restraints of trade are generally brought in the Supreme Court. In the event a person acts in breach of a restraint, and a Court finds that it was a reasonable restraint, that person will be liable to compensate their former employer for the extent of the loss suffered as a result of the breach. This can be and, often is, more than the former employee gained by the breach.