Job Offer Letter - Contract Terms

hi

I am looking at offer from a potential employer and somewhat confused/unsure about the terms which I have gone back to the recruiter with but would like opinion here of people who may have come across this.

The employer is a small company with 25 people. My role is not client facing but I will have access to confidential information of the company as I will be working closely with the founder. The offer letter states that after termination of employment for whatever reason - there is a restraint period of 6months where I cannot engage directly or indirectly with a business similar to or in competition with the employer's business in a capacity which is the same or substantially similar to the capacity I performed.

The notice period of termination is aligned to NES (which I can see from Fairwork website is max 4 weeks). Are they required to pay me for the whole 6months unless they take the restraint clause out?

regards

Comments

  • +32

    I'm not sure about your industry, but I've signed offers with similar terms in them in the past and my understanding is they are completely unenforceable - it's essentially a restriction of trade. If you get poached by a competitor, just be honest with management and don't get caught taking confidential information with you, you should be fine. IANAL.

    • +1

      This ^ is my understanding too. Essentially those contract terms mean that you cannot work for 6 months in your field once you quit. I don't see how that is reasonable and enforceable.

      • ok thank you - good point on enforceability - it just seems odd to include though. I have asked the question though to the agency - lets see.

    • +46

      IANAL

      How are your sexual preferences relevant to the OPs question?

      • +5

        i think it stands for I Am Not A Lawyer

        • +1

          That makes sense. Cheers

        • Select the text, right click on the selected to display your browsers context menu list and choose "Search (insert search engine here) for (insert text here)" and a tab or window will appear with results that will Educate you on the meaning!

      • +1

        so, do you?

      • +1

        I thought it was missing a ❤️ somewhere

    • +4

      This is correct, it's just there to make you think twice but is completely unenforceable. My former employer had someone leave, he called all the clients the day after he left and a bunch of them moved over to his new business. It went to court and, while a prick of a thing to do, the basic premise is, a former employer had no legal right to prevent you from earning a living.

      If you leave, use your discretion, don't pinch trade secrets, don't share confidential information, don't contact former clients, but if those client contact you there is nothing a former employee can do about it. My strategy was to train all my clients to call my personal mobile, when I left they contacted me and I was in the clear.

      • I've only seen such contracts say I can't work for same clients after resigning, but I've even seen that done without repurcussions. Did seem to be an ethics issue to me.

    • -5

      They are indeed enforceable!

      But only to the point that the employer must prove that working for that competitor would have given them a distinct advantage over your previous employer due to the privileged information you obtained or have negative consequences for the previous employer as a direct result of having such privileged information.

      Note they must operate in the same market, selling the same goods and services and serving the same customers or similar customers in the same geography. This is where they are difficult to prove or enforce.

      In any case you don't wont to be up for a legal challenge just to prove this case.

      As others have said this is quite normal

      Just take a holiday when you leave or work for a non-competitor. Its that simple

      • +1

        Just take a holiday when you leave or work for a non-competitor. Its that simple

        Not that simple.. Why would I limit myself to only non-competitor? Poaching happens all the time, if the opportunity arise, anyone should be able to exercise it.

  • Is there clarification on what penalty or similar applies if you do?

    • No clarification but obligation to make the prospective employer aware of this restriction and that if the restrictions are void/illegal it shall be read so as to be valid and enforceable. Not sure what it means.

      • +2

        " restrictions are void/illegal it shall be read so as to be valid and enforceable. Not sure what it means."

        It wasn't written by a genuine lawyer?

        • +1

          Yeah pretty much saying, if I murder you and the law says it's illegal, I say it's still legal and this term shall prevail above anything else. I bet whoever wrote that thinks their smart.

  • -1

    Fair Work rules override anything they put in a contract.

    • +1

      Not quite true. Fair work tends to be the minimum standards, yiu and an employer can agree to other conditions provided they are more favourable, such as higher pay or extended notice periods.

      Fair work is there as a safety net or minimum.

  • +1

    Are they required to pay me for the whole 6months….

    The answer is no, but the main question will be around the reasonableness and enforceability of that clause. They usually only try to enforce it at the very senior level. Us peasants are safe!

    • +5

      They usually only try to enforce it at the very senior level.

      It is enforced by paying the person for the period they want to enforce the non compete clause.

      For everyone else it is just a scare tactic.

      • It is enforced by paying the person for the period they want to enforce the non compete clause.

        Very common in finance jobs, but they'll only pay you a base salary and you'll miss out on your bonus which could be more than the salary.

        Deferred compensation is also a very common way to get you to stay.

        Luckily, most other players in the same space will wait for you to serve out your gardening leave, pay a sign on bonus and buy out your deferred comp to make it worth while to change jobs.

  • +11

    It is common for post-employment restraints to be put into contracts.
    It is somewhat less common that they are enforced.
    Post-employment restraints are prima facie void as a matter of public policy - but they will be upheld to the extent they go no further than the protection of a legitimate business interest.
    No, they do not need to pay you during your post-employment restraint.

    • +1

      This is the correct response. Most often as result employers will use 'cascading' restrictions, e.g.

      • restrict for 6 months for x scope, or alternatively
      • restrict for 3 months for y scope…..

      Regardless still down to what will be upheld as protection of legitimate business interest (e.g. confidence and goodwill).

      That all said it is sad to see it used so frequently as a scare tactic.

  • +1

    I wouldn't be worried about that clause when starting out at the job.

    • +1

      Negged? Oh well.
      If OP doesn't like the clause, don't take the job.

    • Yeah, why worry about those kind of long term things at the start of job … :/

  • +1

    They won't able to impede your ability to generate income via work post employment using the clause, rendering it uneforceable.

  • +2

    they're pretty common, it's basically a backstop to try and prevent you from stealing IP and running to a competitor. don't sweat it.

  • -3

    I cannot engage directly or indirectly with a business similar to or in competition with the employer's business in a capacity which is the same or substantially similar to the capacity I performed.

    That's the key here.

    • +4

      Not really, that is completely irrelevant.

    • Good luck working for Amazon, they are into everything.

  • +2

    Sounds like a Pretty standard non-compete clause.

  • +6

    Their terms are too broad to be enforceable, IMO.

    I'm not a lawyer, but I've worked at several staffing and recruiting firms in the finance team, I used to review contracts and salaries from a cost perspective and spent a lot of time with the IR lawyers figuring out where our exposures were. I've seen cases where these were upheld. They were in the case of executives with very specific skills/knowledge going into directly competing businesses. They're not allowed to just stop you working at all for 6 months after leaving. Even if they're willing to pay for it you can still just quit and go somewhere else.

    You have a right to go to work that trumps whatever they want to protect. Since they didn't spell out what they're protecting, it won't be enforceable.

    You can also ask them to just remove the clause from the contract as well. I've rewritten parts of my contract before signing it and no one seems to care, but even if they want to leave it in I wouldn't be too worried. My last work contract had it in there and when I was made redundant earlier this year they laughed when I asked if they actually planned on enforcing it.

  • +1

    I have seen this play out in court a while ago and with a 12 month restraint they had to pay or let the person work for the competitor. The court said that 3 months was okay as they were in a very senior management (3rd layer of management, board, MD then the MD direct reports and he was at this level).

    So it depends on the level you are in the company and also what you get paid. Low level probably 1 month is okay, MD would probably be 12 months and scales between the two depending on your position.

  • MD would probably be 12 months

    So Doogie Howser would get 12 months?

  • Non-competes are generally unenforceable, unless you are a key person to the company like chief engineer who is core to the main IP of the business then the company has an argument.

  • +2

    Agree with other posters above. Unless you're the CEO, CFO or other senior executive a 6-month non-compete is generally unenforceable. The provision you mentioned, "if the restrictions are void/illegal it shall be read so as to be valid and enforceable" allows a court to read down the 6 month period to a shorter period (if such shorter period is deemed to be enforceable by the court). Sometimes you'll see a cascading period mentioned in the contract, e.g. 6 months, 3 months, 1 month. Again, if you're not a senior executive the most likely outcome is that a court would deem the entire provision to be anti-competitive and strike it out of your contract. Smaller companies often use cheap templates found online (or prepared by a 1-man law firm) which might suggest why the clause is in your contract.

    Keep an eye out for non-solicitation clauses (i.e. you're not allowed to poach employees, steal customers, etc), and anti-disparagement clauses (i.e. restrictions on badmouthing the company). Those are more likely to be upheld as enforceable by a court.

    • worth pointing out it’s not just C-suite roles - the real big one is Product Manager type roles. If you’re someone who has access to information regarding technical/product roadmaps, it makes it more enforceable

  • +1

    Pretty standard and largely unenforceable as mentioned by others. Just make sure you don't quit and jump to another competitor and take IP or clients with you, nor badmouth your old workplace to former clients and you're fine.

  • I've dealt with something quite similar when changing jobs in a professional consulting capability. My recommendation would be to make sure you remain seperated from any competitive business transactions or tenders/proposals etc in which your new organisation would be competing against your old organisation (including not having your CV in the tender). After the tender is won, you'd be fine to work on it though. It is really about protecting IP in so far as what is reasonable and not stealing clients from your old work - a "don't be a jerk" clause.

  • +1

    Are they required to pay me for the whole 6months unless they take the restraint clause out?

    Yeah, nah.

  • Thanks All. I have got the direction I wanted.

    Any ideas how can I close the comments.?

  • When I was a sole trader/contractor an employer tried similar terms on me. I had my solicitor look at it and those terms were illegal.

    It was classified as restraint of trade because they were trying to restrict how I earned my living (engineering).

    I would suggest you seek professional advice from either a solicitor or (maybe) Fair Work.

    In my case, the contract was 12 pages long and I red penned all the parts I didn't agree with and got the contract down to 4 pages. I presented that to the employer and he agreed.

    Just because they put it in a contract doesn't mean it is legal (or fair and equitable).

    If they don't like it tell them their employment conditions aren't agreeable.

  • This is pretty standard in my experience. It’s basically “please don’t go work for a competitor”. However I’ve seen it happen, so as long as it’s all above board, should that scenario arise, you should be fine. What it usually means in practice is that you said “i’m resigning because this morning i have accepted a role with Your Competitor” and they walk you from the premises there and then and pay you out 4 weeks.

    It’s potentially hard to enforce depending on the scenario because they need to prove that you have directly caused financial damage to the company. But also IANAL so your mileage may vary.

  • I recently signed a contract that had similar terminology in it about not working for a competitor for up to 12 months after terminating my employment.

    I discussed it with the employer and they agreed to removing (crossing out) that clause.

    • +1

      Just to add:

      IMO if there are any clauses you are concerned about in your contact: discuss your concerns with the employer.

      I can see some people here saying such clauses are unenforceable; even if that is true, you'll still potentially be dragged through court to argue the point.

  • Thats a very common clause in contracts regarding termination. It protects the business you’re employed at. Dont really thinks its anything for you to be overly concerned with, given you’re not in sales or client facing.

  • Standard non compete clause. Do you want the job or not? Just sign and don’t worry about the clause. They are legally enforceable and ensure you negotiate at least 6 months salary in your termination conditions

    • ensure you negotiate at least 6 months salary in your termination conditions

      Hahahahahahaha

  • I'm in sales in an industry where there's two main players. I left one and have spent 10 months away before joining their competitor. I haven't contacted my old customers and the company I am with has given me their biggest account who wasn't buying from my original employer however I think once the 12 months is up it will be open slather. My original employer knows where I am through word of mouth but they haven't taken any action because they probably know that have witnessed them acting unfairly in the past themselves. I have deactivated my LinkedIn to ensure I'm not spruiking my arrival to business contacts who purchase from both companies and I haven't even posted that I have a new job on any social media. Unless you take files with you and actively contact customers I don't believe any legal action is going to hold up in court. Just be sensible about it and discuss this with your new employer and I am sure they will take the appropriate precautions.

  • +1

    This is something I dont have to ever worry about as I get $50k working 42 hours pw (Including both Saturday and Sunday,(and if I ever taken 1 of the 2 days off on the weekend I dont get the bonus payment for that week)

  • Unconstitutional even if you sign. It's standard as scare tactics in a lot of industries.

    When I looked it up, I found no cases in Australia of someone enforcing this.

  • Unless you are getting specific extra compensation to cover those 6 months then this is completely unenforceable garbage. Whether you sign it or not is up to you, but there aint a thing they can do to enforce it unless you are getting a very sweet extra pay packet. It basically becomes an unfair restriction of trade.

  • +1

    Lol imagine being a pilot and having this in your contract. "Sorry but if you ever leave us, you cant be a pilot in your next job. Uber driver perhaps?".

  • -1

    Big big mistake here guys. This actually is enforceable by law. It’s happened to a mate of mine.

    This is basically non compete clause. Due to trade secrets ect… you can’t just give them to your main competitor.

    We have this in our contract your chances are at best 50/50 if it went to court.

    Thing is it’s more a kiss and don’t tell think. Just don’t announce where you are going. Also if your in breach of contract you lose the job what liabilities can they claim ?

    • Generally these are not enforceable, especially when generic in nature. The only time it is enforceable is in very very select cases where you are being appropriately compensated and their is a justifiable very specific reason like you have to future plans that would put them at a competitive disadvantage were you to join their competitor. In those scenarios they may be 50/50 in court, however the generic no compensation non compete clause will pretty much be thrown out instantly.

  • THAT SOUNDS QUITE REASONABLE

  • +1

    https://www.workplace-lawyers.com.au/employees/post-employme...
    Refer to section C paragraph 2.

    In my own experience, I have signed multiple employee contraccts with similar clauses in them. I am in the IT trade with one of the big 4 consulting firms. I have in the past provided my resignation by giving the standard 4 weeks notice and moved from one company to another (between the big 4 consulting firms that is). It comes down to a few things, but mostly how tactful your tenure with the business was and how you decide to leave the company when you resign. For the most part the courts will side with the people, in respect that one still needs to earn a living. However, caution should still be exercised as the company can still make a strong case to defend their IP and standing within the sector.

  • those clause is pretty common but not really enforceable as long as you are not the top sales in the company and running to a competitor…

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