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Benchmark - Employment
Employment
    •  Restraint on working for competitor
        -  Following termination of employment



Following termination of employment 

A former employee of one real estate agency had worked for that agency for about eight months when he became ill and then switched employers. While employed with the first agency, he signed an employment agreement that included a restraint of trade clause restricting him from inducing other employees to resign, inducing customers to cease trading with the agency, or working for any competitor within six months or within a distance of 7.5 km of the agency.

The first agency brought a claim against its former employee to enforce the restraint of trade clause. The Court considered the circumstances of four customers who followed the employee to his new employer and found that he had not induced them to follow him – they had sought him out. The Court held that the employee had not breached the employment contract in any of those cases. An agent has no property in a customer. Therefore, customers are free to change agents if they choose.

The Court also considered whether it was appropriate to restrict the employee from seeking other work as a real estate agent within 7.5 km of his former employer. Restraints of trade are only permissible if they are reasonable, and a distinction is drawn between clauses that restrain employees from disclosing confidential information or soliciting customers of their former employers and clauses that simply restrict competition altogether. Here, there were about 34 other agents in the area, the employee was but one of six salespersons employed by the agency, and the employee had had no special relationship with the agency’s customers having been employed there for only eight months. The Court found that the restriction was unenforceable.

Marlov Pty Ltd v Murat Col [2009] NSWSC 501