Restraint of Trade in Employment Contracts

This assignment explores the concept of restraint of trade clauses within employment contracts, emphasizing their legality and ethical considerations. It examines relevant Australian legislation, including the Restraint of Trade Act 1976 and the Competition and Consumer Contract Act 2010, highlighting the importance of reasonableness in such agreements. The analysis draws upon key case law examples like Wallis Nominees (Computing) Pty Ltd (2013), Nordenfelt v Maxim Nordenfelt Guns & Ammunition (1884), and Sear v Invocare Aust (2007) to illustrate the court's approach to evaluating restraint of trade clauses. The assignment concludes by providing guidance for managers on drafting appropriate restraint of trade clauses that balance the interests of both employers and employees while adhering to legal standards.

EMPLOYMENT CONTRACTS

Table of Content
Introduction:...............................................................................................................................................3
Conclusion:..................................................................................................................................................4
Assessment Work Instruction 2...................................................................................................................4
Objective.....................................................................................................................................................5
Work Instruction for the inclusion of “Restraint of Trade” in employment contracts.................................5
Reference:...................................................................................................................................................7

Introduction:
Various point needs to be considered while preparing the employment agreement for employees
or subcontractors. The following points needs to be considered by the managers while drawing
up the agreement.
Termination: it is important that the company defines the procedure of ending the contact even
before it begins. Since failure to do may result in painfully lengthy and cumbersome processes.
Confidentiality: It must be mentioned in the contract that the contracted employee must deal with
sensitive information received from the client in a sensitive manner. In addition to that it is the
responsibility of the employee to maintain a high level of confidentiality of the business
information. (Freedland et al 2016)
Payment: While making the payment to contractual workers it is important to consider the level
of customer satisfaction and service delivery efficiency.
Insurance: It is important to ensure that the subcontractors and employee are aware of his/her
obligation. It is advisable not to incorporate any detail without checking with the suppliers.
Attitude and personality: If the branding policy of the company demands a certain type of
attitude and personality it is mandatory to ensure that the subcontractors or regular employees are
aware of it.
Responsibility: The agreement must mention the level of empowerment given to the employees.
As a manager it is imperative to remember that the level of pride that the employees take is
directly proportional to the contribution he/she makes to it.
Customer expectation: The employment agreement must also have a scope to include a client
involvement agreement. This document must highlight the interactional criteria between the
clients and the company. It is important that the employees and the subcontractors understand it
in order to keep up with the effective communication process. (Shields et al 2015)

Conclusion:
The Commonwealth Independent Contract Act 2006 aims to provide the opportunity to
independent contractors to enter the service agreements. The act gives legitimate right to the
independent contractors to work. This act forms the base of the agreement that is drawn up for
the contracted employees.
Passed by the Rudd government, the Fair Work act was passed in the 2009. This act regulated
the aspect of collective bargaining monitoring the terms under which employees can be hired.
This act aims to establish a productive workplace relation which leads to the growth of social
inclusion of all individuals.
Both of these acts must be focused upon while preparing the employment agreement for both
subcontractors and employees.
Assessment Work Instruction 2
Overview
Work instruction is an important aspect which helps the employees effectively to move on a
specific path and effectively operate a task. The work instruction provides the basic steps to
complete a task and manage the operations in a chronological process. The work instruction is
considered highly important for most of the organisations since they think it as a mandatory
requirement rather than being just a process. The work instruction helps to improve the overall
procedure of work. Even though procedure and work instruction is used in exchange to each
other but there is a significant difference in their meanings and operations. The work instruction
is a step by step process which helps to complete a job effectively (Twomey, 2012). In the
present case the work instruction is developed in order to work on the inclusion of the aspect of
“restraint of trade” clause in the employment contract. The scenario at the present moment is
such that most of the managers are now trying involving restraint of trade which becomes a bit
harsh for the employees. It is undeniable that certain level of restraint of trade is important for
the employees but having harsh restraint of trade with over two years could definitely affect their
career and hence it is important to have a stronger and effective strategy to implement restraint of
trade clause in the employment contracts. In this work instruction the managers working in the
HR department of the organisation will be provided with the basic steps which would help to

maintain a proper balance in the employee activities and for the employers (Glynn, Arnow-
Richman and Sullivan, 2015).
Objective
The main objective of writing the work instruction on restraint of trade clause is to have a proper
balance in the employer-employee relationship. Harsh restraint of trade affects the career of the
employees and the employers gain bad reputation which increases employee attrition and affects
acquisition of talent that leads an organisation to success. Hence it is important for the
organisations and the HR managers to effectively manage this clause and assess its priority and
use which would help to understand how this clause needs to be used. The work instruction is
discussed in order to implement “restraint of trade” clause but with reasonableness (Twomy,
2012).
Work Instruction for the inclusion of “Restraint of Trade” in employment contracts
Restraint of trade is an aspect which most organisation feel necessary but at times it becomes
harsh for the employees since in some of the contracts it might affect their overall career
progress. An employer is not authorised nor have any right to stop the career of an employee
abruptly by imposing such harsh restraint on trade and hence it is important to develop a work
instruction which the managers will follow in order to implement restraint of trade clause in the
employment contracts. The restraint of trade should be practiced in such a way that it doesn’t
harm both the employers and the employees. The IRAC model will be used to state the
instructions effectively.
The issue identified in this case is the harsh imposition of restraint of trade and this could affect
the employer and employee relationship. The Restraint of Trade Act 1976 clearly states that
restraint of trade in consumer market and even in employment will not be applied if it’s
unreasonable. In the recent decision by the Victorian Supreme Court of Appeal in Wallis
Nominees (Computing) Pty Ltd (2013) VSCA 24 has clearly showed that the Australian
Government and court will not agree with harsh and unnecessary restraint of trade.
The basic rule stated by the Competition and Consumer Contract Act 2010 is that restraint of
trade will be considered void until and unless the restraint of contract is reasonable in the interest
of the parties and they are reasonable in the interest of the public.

The application and analysis of the above acts is important which would help to make sure the
restraint of trade is managed effectively and implemented effectively. The case of Nordenfelt v
Maxim Nordenfelt Guns & Ammunition (1884) AC 353 clearly showed that the court will
consider restraint of trade effective only if it is in the interest of both the parties which was
clearly reflected in this case as the court held that Nordenfelt will not manufacture armaments for
25 years but after that it will be open to compete with Maxim. Another case where the court
considered restraint of trade too harsh is Sear v Invocare Aust (2007) WASC 30 where a funeral
worker was restrained for work in Perth for five years which is clearly unnecessary and
unreasonable.
Drawing conclusion from the above discussion it could be said that the managers should focus
on having the restraint on trade clause included in the employment contract keeping in mind the
reasonableness of the situation and should focus on taking into account the interest of both the
parties or else the Court will not consider it valid.

Reference:
Freedland, M., Bogg, A., Cabrelli, D., Collins, H., Countouris, N., Davies, A.C.L., Deakin, S.
and Prassl, J. eds., 2016. The contract of employment. Oxford University Press.
Glynn, T.P., Arnow-Richman, R.S. and Sullivan, C.A., 2015. Employment law: Private ordering
and its limitations. Wolters Kluwer Law & Business.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., Johns,
R., O'Leary, P., Robinson, J. and Plimmer, G., 2015. Managing Employee Performance &
Reward: Concepts, Practices, Strategies. Cambridge University Press.
Twomey, D., 2012. Labor and Employment Law: Text & Cases. Cengage Learning.
Case Laws
Nominees (Computing) Pty Ltd (2013) VSCA 24
Nordenfelt v Maxim Nordenfelt Guns & Ammunition (1884) AC 353
Sear v Invocare Aust (2007) WASC 30
Statutes
The Restraint of Trade Act 1976
Competition and Consumer Contract Act 2010