Employee couldn’t take boss’s clients for 6-months – thanks to a non-solicitation clause
The government does not want to stop your ex-employees from working in their chosen trade or profession. Irrespective of what you put in your Employment Contract:
- a financial planner can continue to be a financial planner: see Entello v Firooztash  QDC 50)
- an accountant can continue to works as an accountant, do tax returns and audits
- an electrician can continue to be an electrician
Steal the client list?
But stealing your clients, suppliers and confidential systems is a different story. In your Employment Contract, you can stop your employee from stealing your goodwill. This is just as you can stop them from stealing the furniture in your office.
However, the non-solicitation restraint has to be reasonable. This is to both:
1. time (after they leave you); and
2. the area, such as ‘100 kilometres’ of where they worked.
Have a look at our Sample Employment contract on how we deal with this issue of both ‘time’ and ‘area’. We put it in stages, so, if the court thought the ‘time’ restraint was too long, then the court could enforce a shorter period. If you didn’t do this then the court may not enforce any ‘time’ at all.
Restraints must be in Employment Contract – and be correctly drafted
In Entello P/L v Firooztash, the old employer had to go to court to enforce a six-month non-solicitation restraint against his ex-employee. Instead, had the employer built the Employment Contract on our law practice’s website he would have had the 6-month restraint built into the Employment Contact. Only lawyers provide:
- legal professional privilege
- lawyer PI insurance
- legal advice
- our signed letter explaining the document and what to do now
The Court has broadened the concept of ‘solicit’ in favour of the old employer. Our Employment Contracts adopt this new broader definition.
‘Solicit’ is now interpreted differently
The Court stated that ‘solicit’ means ‘to ask for business’. That is not new. What about if your old employee does not telephone or email your clients? In other words, the ex-employee does not expressly ask the client to come and join him. The ex-employ may not have approached the client at all – it may be the client approaching your ex-employee.
The ex-employee is still ‘soliciting’ that is ‘asking for business’ if he gives the impression of wanting the client. It is still soliciting if there is any encouragement. This is new law and highly beneficial to the employer. This is provided that they have an up-to-date Employment Contact – such as the one you can build on our legal firm’s website.
In our view, it is clearly ‘solicitation’ if the adviser is approached by the client and asks ‘how can I move to your new business’ and the adviser answers with ‘I can’t give you one, but all you need to do is sign a letter of appointment’.
Only a law practice can give legal advice. We can help you answer the questions as you build your legal document on our website.
Build your Employment Contract here.
Adjunct Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
National Australian law firm
39 Stirling Highway, Nedlands, WA
Mobile: 0477 796 959
Direct: 08 6389 0400
Reception:1800 141 612
Email: [email protected]
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These cases are incorporated into all Legal Consolidated Employment Contracts regarding non-solicitation clause :
- Amoco Australia v Rocca Bros Motor Engineering Company (1973) 133 CLR 288
- Apollo Shower Screens v Building and Construction Industry Long Service Payments Corporation (1985) 1 NSWLR 561
- Archer v Richard Crookes Constructions (1997) 15 NSWCCR 297 – non-solicitation clause
- Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57
- Brandi v Mingot (1976) 12 ALR 551 – restaint of trade
- Buckley v Tutty (1971) 125 CLR 353 – employee stealing
- C Medtel P/L v Courtney  FCAFC 151 – employee stealing
- Cadwallader v Bajco  NSWCA 328
- Hellmann Insurance Brokers v Peterson  NSWSC 242 3 – – restaint of trade
- Jardin v Metcash Ltd (2011) 285 ALR 677
- Jones v Dunkel (1959) 101 CLR 298 – employee stealing
- Koops Martin v Reeves  NSWSC 449 – restaint of trade
- Lidner v Murdoch’s Garage (1950) 83 CLR 628
- Payne v Parker  1 NSWLR 191 – employee stealing
- Pearson v HRX Holdings (2012) 293 ARL 554
- Putsman v Taylor  1 KB 637
- Sidameneo (No. 456) v Alexandra  NSWCA 418
- Smith v Ryngell  1 QdR 179
- State Transport Authority v Apex Quarries Ltd  VR 187 – non-solicitation clause