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In a recent decision, Miles v Genesys Wealth Advisers Limited, the NSW Court of Appeal determined the validity of a 30 month restraint against a Managing Director.
During his 20 year employment with Genesys and its predecessor, APFS, Miles developed longstanding relationships with clients and was privy to highly confidential information about their finances and likelihood of staying with Genesys. He also accessed Genesys’ business plan, brokerage reports and staff remuneration details.
In late 2006, Miles discussed leaving Genesys with the CEO. In February 2007, he (with legal advice) and Genesys executed a deed of release. The deed enabled Miles to receive ongoing benefits under Genesys’ incentive plan, in exchange for restraints on competition, in force until September 2009. This included conducting a business similar to or competitive with Genesys, using “confidential information” (as defined) to the detriment of Genesys, and soliciting Genesys’ clients.
In 2008, Miles planned a business venture, competing directly with Genesys. At the time of the hearing, Miles had approached Genesys’ clients, and intended to make offers more attractive than those of Genesys.
Genesys alleged that Miles had breached the restraints. The restraint about confidential information was held to be invalid beyond 14 months, as Miles’ recollection of the information was unlikely to detrimentally affect Genesys.
Significantly, the 30 month restraint regarding competition and solicitation was held as reasonable and valid, having regard to the threat to Genesys’ legitimate business interests.
HR tips
• Employers should ensure that any proposed restraints go no further than is reasonably necessary to protect legitimate business interests.
• Assess confidential information the employee has had access to during employment and what interests unauthorised use could affect.
• More senior employees justify more extensive restraints.
Sharlene Wellard
Special Counsel
Australian Business Lawyers
sharlene.wellard@ablawyers.com.au
