Restraints of Trade: The Legal Practice

26 Pages Posted: 17 Oct 2013

See all articles by Christopher Jon Arup

Christopher Jon Arup

Monash University

Chris Dent

Murdoch University - School of Law

John Howe

University of Melbourne Law School

William van Caenegem

Bond University

Date Written: October 16, 2013

Abstract

This article assesses the impact of legal practice upon the enforceability of employment restraints of trade. Post-employment restraints range from those prohibiting use of confidential information acquired through employment (non-disclosure clauses), or the solicitation of previous customers (non-solicitation clauses), to wider clauses imposing an obligation on the employee not to compete with the employer for a defined period after the termination of the employment (non-compete clauses). The empirical research reported in this article demonstrates that there is much uncertainty in the operation of the law around the use of restraint of trade clauses in employment contracts. While most usefully nuanced, the evidence suggests that to a significant extent, this uncertainty weighs more heavily on the side of any dispute that is least able to bear it – the employee. In light of our findings, we have introduced a limited number of reform options (ranging from the radical to the limited, and from the substantive to the procedural) that would assist in reducing the over-enforcement, or over-observance, of restraint clauses.

Keywords: restraint of trade, non-compete, enforcement, uncertainty

JEL Classification: K00, K31

Suggested Citation

Arup, Christopher Jon and Dent, Chris and Howe, John B and van Caenegem, William, Restraints of Trade: The Legal Practice (October 16, 2013). University of New South Wales Law Journal, Vol. 36, No. 1, 2013; U of Melbourne Legal Studies Research Paper No. 660. Available at SSRN: https://ssrn.com/abstract=2341433

Christopher Jon Arup

Monash University ( email )

Monash Business School
PO Box 197
Caulfield East, Victoria 3145
Australia
+61 3 9903 1026 (Phone)

HOME PAGE: http://monash.edu/research/people/profiles/profile.html?sid=11750&pid=4320

Chris Dent

Murdoch University - School of Law ( email )

United States

John B Howe (Contact Author)

University of Melbourne Law School ( email )

Centre for Employment & Labour Relations Law
Parkville, Victoria 3010
Australia
61 3 9344 8924 (Phone)
61 3 9349 4623 (Fax)

William Van Caenegem

Bond University ( email )

Gold Coast, QLD 4229
Australia

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