Restraint of Trade Clauses

15 February 2022 in Business Law, Civil and Commercial Litigation and Law, Commercial Lawyers, Contract Lawyers

What is a Restraint of Trade Clause?

Employment contracts may include restraint of trade clauses. These clauses can prevent or restrict employees from engaging in conduct that is against the interests of the employer. A restraint of trade clause may:

Prevent an employee from revealing an employer’s confidential information such as trade secrets.
Prevent employees from working with an employers’ competitors.
Prevent employees from poaching other employees from the employer’s business.
Prevent employees from undertaking a business similar to their employer’s within a certain area
Prevent employees from soliciting the employer’s customers or clients.

A restraint of trade clause will include a clause specifying the duration of the restraint of trade.

Are all Restraint of Trade Clauses Enforceable?

Not every restraint of trade clause is enforceable. In general terms, restraint of trade clauses must be reasonable to be enforceable. Determining whether a restraint of trade clause is reasonable requires consideration of factors such as;

The duration of the clause.
The conduct which the employee is restrained from.
The legitimacy of the interests which the clause protects.
The scope of the clause.
The public interest.

Restraint of trade clauses are typically enforced through the use of an injunction or financial compensation for damages.

BSM Lawyers

The highly experienced business lawyers at Brander Smith McKnight are able to answer any questions and assist you in the review of contracts with restraint of trade clauses and the enforcement or challenge of these clauses.