Over the last two decades, the use of restraint of trade clauses has become increasingly common. We have noticed a tendency in some companies who are perhaps utilising the same adapted contract for each of their staff members to include a restraint of trade clause in all of their contracts, even for junior employees.

The aim of a restraint of trade clause is to restrict the former employee from undertaking certain activities for a certain period – for example, working for a rival in the employer’s trade.

However, we consider that such clauses should be used judiciously and drafted carefully as such clauses will be closely scrutinised by a lawyer or advocate for the former employee or by the Court if a former employer attempted to enforce the cause.

As we set out in our blog The cost of breaching a restraint of trade, the position at law is that restraint of trade clauses are prima facie (at first sight) void and are therefore unenforceable. For a restraint to be enforceable it must:

  • be made to protect a legitimate proprietary interest
  • be reasonable as between the parties and in the public interest.

We will discuss each of these elements in turn.

Legitimate proprietary interest

Restraint clauses cannot be utilised to protect against mere competition. Accordingly, the protected interest must be proprietary, that is, the claim for protection must be “based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, [the employer’s] property”. Proprietary interests most commonly include trade secrets, confidential information and business connections – such as relationships with clients.

When assessing whether the employer had a proprietary interest in the employee’s relationships with clients, the Court will look to whether the employee had a great degree of influence over the client such that they should entice them away. This will not be the case where the employee is junior.


Once an employer establishes that they have a legitimate proprietary interest that needs protecting, the next step in determining the legitimacy of the restraint is to assess whether the restraint is reasonable between the parties and in the public interest. The assessment of reasonableness is a question of law assessed at the time the contract is signed.

The overall assessment is whether the clause is no wider than necessary to protect the employer’s proprietary interest. In assessing reasonableness, the following factors may be considered and weighed:

  • The bargaining powers of the parties at time of signing.
  • The employee’s role in the employer’s business.
  • Whether the employee had access to confidential information.
  • The geographical area of restraint.
  • Consideration given – in terms of whether the contract was of short duration, had a long trial period, had a short notice period and whether the restraint clause was added by way of a variation to the contract.
  • Duration of restraint – a general rule of thumb is that restraints for more than 12 months will not be reasonable.
  • The position of the employee when they left their employment and whether they were placed on a period of garden leave.

Restraint of trade clauses are difficult. If you are an employer in the process of drafting, reviewing or updating employment contracts, restraint of trade clauses should be carefully scrutinised. While it may seem like a clause that will protect your business, if it is not well thought through and does not protect a proprietary interest or is not reasonable, seeking to enforce the clause will be an ultimately fruitless and costly exercise.

We consider that the better approach is to engage a lawyer from the outset to consider whether a restraint clause is appropriate and to carefully draft the clause to ensure its enforceability. Give Bell and Co a call on 04 499 4014 or book in an appointment through calendly.