Non-Solicitation Clauses

A non-solicitation clause is generally contained within an employment contract to protect an employer’s business and clientele after an employee leaves their business. The purpose of a non-solicitation clause is to restrain a former employee from soliciting or inducing the employer’s clients.

Restraint of Trade

A restraint of trade operates to restrict the freedom or liberty of a person in the future of carrying on the trade with other persons, not parties to the initial agreement. A restraint of trade is, as a matter of presumption, void or unenforceable but not illegal[1]. In Buckley v Tutty[2] it was acknowledged that restraints that are unreasonable are unenforceable as it is contrary to public welfare that a person should be prevented from earning a living.

The presumption that the restraint is void is rebutted if the restraint was, at the time when it was agreed[3]:

  • Reasonable in reference to the interests of the parties concerned; and
  • Not injurious to the public.

The Court in Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd[4] stated that a restraint of trade clause will not be void if it poses no greater restraint than that which is reasonably necessary for the protection of legitimate interests of the party asking to enforce it. However, the onus of rebutting the presumption rests upon the person seeking to justify the restraint.

Non-Solicitation Clause

Generally, an employment contract will contain a non-solicitation clause to restrain an employee upon termination or cessation of their employment agreement with the employer. The purpose of a non-solicitation clause is to protect the employer’s business and clientele and to restrain the employee from soliciting the employer’s clients.

Reasonable restraint

If a non-solicitation clause poses a greater restraint on an employee than that which is reasonably necessary to protect the employer’s business, the clause will be void or unenforceable. The Court in AGA Assistance Australia Pty Ltd v Tokody[5] held that a period of 12 months was reasonable for a non-solicitation clause to reasonably protect the employer’s legitimate business.

Meaning of Solicitation

As an employee you need to ensure that you aware and understand that during the restraint period you must not solicit any clientele from your former employer. To solicit means to call for, to make request, to petition, to entreat and to persuade pursuant to the court’s definition in Barrett & Ors v Ecco Personnel Pty Ltd[6]. The Courts have held that solicitation can arise when a former employee has taken any step or action to canvas, solicit or endeavour to entice former clients. This can include completing a proposal for a client or providing relevant information on the new business, despite the client approaching you first.[7] However, if a former client approaches the employee of their own volition to procure their services and no action is required by the employee to secure or provide the services to the former client, then there is reasonable grounds to argue that solicitation cannot be said to have occurred.

If you or someone you know needs assistance in relation to a non-solicitation clause, please feel free to call our office on 07 5444 4750 or email at [email protected]

 

[1] JW Carter, LexisNexis, Carter on Contract (updated at May 2012), Part VI, Chapter 27, section 4.

[2] (1971) 125 CLR 353 [380].

[3] JW Carter, LexisNexis, Carter on Contract (updated at May 2012), Part VI, Chapter 27, section 4.

[4] [1973] HCA 40.

[5] [2012] QSC 176.

[6] [1998] NSWSC 545.

[7] Ibid.