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Excerpts from this article first published in ‘Human Resources’ Magazine, Issue 111, 22 August 2006
In Cactus Imaging Pty Limited v Peters, the NSW Supreme Court enforced a restraint of trade obligation in a sales manager’s employment contract. The Court upheld the ongoing requirements in the contract that for a 12 month period after leaving Cactus, the sales manager not contact former clients or seek to entice away his former colleagues. The sales manager also had a 12 month restraint on working for a direct competitor, but Cactus did not try to enforce this obligation.
After resigning from Cactus the sales manager initially worked for a company in a different business to Cactus. However, 5 months later he took up a senior position with Cactus’s main competitor in the grand format printing industry (ie. printing images on material greater than 6 metres x 3 metres in size). At this stage Cactus sought an injunction preventing the sales manager from contravening his continuing obligations in his contract.
Justice Brereton determined that Cactus could enforce the clause preventing the sales manager from enticing away NSW sales staff for 12 months for the purpose of engaging them in a competing business. This was on the basis that staff connection is a valuable thing to protect as it is part of an employer’s ‘goodwill’.
Justice Brereton also granted an injunction preventing the sales manager from contacting former clients. This decision was influenced by factors including the wider breadth of the sales manager’s knowledge about the needs and idiosyncrasies of Cactus’ clients and his having been involved on a daily basis with leading customers.
HR Tips
This decision is a good reminder to review restraints of trade in employment contracts to ensure the provisions accurately record the prohibited post-employment activities. If there are no restraint provisions, you may wish to obtain legal assistance to develop customised restraint provisions applicable to valuable employees.
When recruiting, it is prudent to find out from applicants whether they have any continuing obligations to their former employer as such obligations may restrict their ability to carry out their new job.
Lucinda Frantz, Senior Associate
