Restraint of trade clauses, or “non-competes,” are used by employers to prevent employees from leaving and setting up in competition down the road.

In many cases, they are vital clauses to have. Such clauses provide remedies against way-ward employees who would otherwise leave their employer in the lurch and take off with trade secrets and client lists. When used in combination with intellectual property and confidentiality clauses, the individual’s employment agreement becomes a useful tool for the employer in any later litigation.

However, the Courts don’t like restraints of trade, and are only willing to enforce them if they are fair and reasonable in the circumstances.

It’s easy to see why the Courts object. Restraints limit employee freedom. Too restrictive restraints are exploitive and prevent employees from freely positioning themselves in the job market.

It is clearly unfair, for example, to impose a restraint of trade on a supermarket worker that prevented them from working within a wide geographical range for several years. Upholding a restraint like that would severely and quite unreasonably limit the employee’s options.

The position is less clear when the employer has a proprietary interest to protect (such as a particular process or client relationship), and this is vulnerable to employees abusing their employer’s trust. In such circumstances, the Courts are more likely to grant an injunction (a court order preventing the employee from breaching the restraint clause) – particularly if the restraint is limited geographically and in terms of time.

A few media articles lately have questioned the usefulness of restraints of trade where the problem the employer really has is a problem with predatory competitors rather than sneaky employees. In those cases, other options against the competitor directly may make more sense than strict restraint clauses. This might include an action to enforce intellectual property rights.

Properly worded clauses will provide good protection against an employee going to a nearby competitor, or setting themselves up next door, but it is vital that they are not so far reaching that they are unreasonable.