A)
ISSUE:
Is the restraint clause preventing X from setting up a competing business within the Adelaide central business district enforceable?
LAW:
All restraint of trade clauses are prima facie void at common law in the interest of public policy. For a restraint of clause to be valid, the party relying on the clause must be able to show that the restraint is reasonable in terms of the geographical extent of the restraint, the time period involved, the bargaining strengths and position of the parties during negotiation; and the type of business and the activity being restrained (Gibson & Fraser 2013).
A restraint clause in relation to the protection of trade connections is only reasonable if it reflects the extent of contact and influence that the employee has had with the client (Gibson & Fraser 2013).
A restraint of trade clause is reasonable if it enables the company to protect its business interests notwithstanding the time frame (Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535).
The business activity being restrained must be of a nature to protect the employer's proprietary interests (Forster & Sons Ltd v Sugget (1918) 35 TLR 87).
A restraint of trade clause intended to prevent an employee taking with them to a competing business intimacies and knowledge from their previous employer, will give that
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It would be reasonably foreseeable that if she did open a competing business in the same operating area as ABC Accounting she would be in direct competition with ABC Accounting. More to the point she intends to inform the clients she dealt with whilst working at ABC Accounting of her new business in the hope of luring them away. The restraint of trade clause would be reasonable as it is intended to protect ABC Accounting's proprietary interests (Nordenfelt v Maxim 1894, Forster & Sons v
Non-compete agreements are usually found in employments contracts in where a company wants to prevent their employees from working for a competing company. The focus of the non-compete agreement is to protect a company’s business interest and trade secrets but, a non-compete covenant must be laboriously drafted to follow the state’s regulation in order to be enforced in court. There is an enormous discrepancy when it comes to cases that deal with non-compete agreements since it deals with revising if the non-compete agreement was lawful to begin with; courts do not have a consistent approach to this. A lot of companies request the courts to enforce the covenant but, in most cases, the agreement is unenforceable due to the unethical and unlawful
Marshall, Shelley, 2004. Enterprise Bargaining, Managerial Prerogative and the Protection of Workers Rights. An Argument on the Role of Law and Regulatory Strategy in Australia under the Workplace Relations Act 199, Vol.22(3), , p.299.
Bennett, Alexander, Hartman (2003), Employment Law for Business, Fourth Edition I., The Regulation of the Employment Relationship, The McGraw-Hill Companies.
...the potential interference of the market into the legal trade circle may be shaped up to match the interest of the involved traders.
Additionally, they guard the employer's clientele and restrict employees from utilizing their skills and information to the advantage of other businesses. Conversely, a counterargument to non-compete clauses is that they restrict an individual's ability to follow their chosen field and make a living. Furthermore, non-compete clauses can be used to threaten workers into quitting or negotiating on more favorable conditions (The Program on Negotiation Staff, 2024). From a utilitarian standpoint, non-compete clauses could be ethically acceptable if they advance innovation and safeguard intellectual property. On the other hand, if they restrict competition and prevent employees from pursuing their professional aspirations, they might not be considered ethical.
For example, the Navigation Laws that were signed between 1651 and 1673 prevented countries from trading with the Americans. It limited the people’s abilities to buy goods from other places. Through the Navigation Acts, colonies were only allowed to buy goods from the British, and were only allowed to sell their goods to the British. However, the colonies were to import any non-English goods through the English ports, and also pay a sum for these imports. These acts also prohibited the colonies from making any goods that have already been produced by the English.
Whitman: “When I Heard the Learn’d Astronomer” Whitman uses many literary devices in this poem to tell his story. The poem is divided into two halves. In the first half, the poem sets place in a lecture room. The narrator is a bored student who is listening to the astronomer’s lecture. He signed up for the class because he enjoys looking at the stars and space, but the course did not meet his expectations.
Both the common law and the statutory law have recognized the weaker position of consumers. It is well established an exclusion clause will be valid and enforceable only if it is incorporated in the contract, use clear wordings and does not contravene statutory limits. In order to limit the unfairness resulting from exclusion clauses, the courts have developed certain principles such as the doctrine of non est factum in signature cases, ‘red ink-red hand’ principle in relation to ‘onerous or unusual’ terms, contra proferentem rule when interpreting ambiguous exclusion clauses and ‘fundamental breach’ principle.
...ur; in such cases, competition authorities must act to fight unlawful practices that are detrimental for the economic welfare.
NON COMPETE AGREEMENT An agreement between two parties, typically an employee and employer, where the employee agrees not to use information learned during employment in subsequent business efforts for a set period of time. Employers usually insist on non-compete agreements because of the possibility of an employee, upon termination or resignation, working for a competitor or starting a business, and gaining competitive advantage by abusing confidential information about their former employer's trade secrets or sensitive information such as customer/client lists, business practices, upcoming products and marketing plans. Found in some business contracts, non-compete agreements are designed to protect a business owner’s investment by restricting
John W. Budd & Devasheesh Bhave (2006). Sage Handbook of Industrial and Employment Relations. Industrial Relations Center, University of Minnesota. Chapter 5.
Political arguments for trade intervention are mainly concerned with protecting the interests of certain groups at the expense of other groups. Most of the time domestic firms benefit from this, while customers suffer the consequences.
...ems to be normal practice now for employers. As long as both parties agree and it does not go against public interest it would seem that restraints can be valid. The courts do not like getting involved in changing the clause to make it valid and therefore enforceable. There have been many tests to make sure that employers make the clauses reasonable and therefore would not have to go to court.
Sidwell, M.,2008. Unfair Trade. [online]. London: Adam Smith Institute. Available at [Accessed 17th Feb 2014].
The role of the government on industrial relations is very important as it sets the legal framework that industrial relations operates in. Appropriate industrial relations legislation should recognize the requirements of both employers and employee’s. Both the employee and the employer want to profit from each other but are also reliant on each other. This means that the equal bargaining power of employers and workers must be recognized (Peetz, David. 2006). Appropriate industrial relations laws should address any imbalance of power and give both groups an equal degree of control. Appropriate industrial relations should not only allow a mixture of both collective and individual bargaining but also facilitate employee participation in day to day workplace decisions. After all it’s the structure and framework of the employment relationship, which is governed by legislation that leads to good Industrial Relations.