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Fair Work questions usefulness of non-compete clauses
The frequency of non-compete clauses and their use in pinning down former employees was examined by the Fair Work Commission.
Naomi Neilson
In a judgment awarded to a terminated employee of Richtek Melbourne, deputy president Alan Colman questioned whether non-compete clauses in “ordinary workers” contracts are genuinely used to protect the business interests of employers.
It imposed a 12-month restriction on work that “engaged in activities substantially similar or identical to the company and provides services substantially similar or services offered by the company”.
“One wonders why such restraint of trade provisions are so commonly found in the contracts of ordinary workers and whether they really protect any legitimate business interest of the employer, or merely fetter the ability of workers to ply their trade, and to reduce competition for labour and services,” Colman queried.
In the judgment, Colman said that while the provision was likely to be unenforceable “on the basis that its scope is unreasonable”, an ordinary worker like the employee could not be expected to know.
“It is understandable that [the employee] would not want to risk embroiling himself in legal controversy by acting contrary to an express provision in his contract,” Colman said.
Given this finding, Colman said he would not make any deductions in the compensation for the employee’s decision not to apply for jobs that may have involved a “prima facie contravention” of the provision.
Colman found Richtek’s termination decision was “harsh” and unfair.
The commission was told the employee received three warning emails on the same day the company sent him the termination letter.
While Richtek was able to prove the employee was rude to a customer and was conduct that had the potential to “bring the company into disrepute”, its other excuse was “unsubstantiated”.
The employee was awarded a figure of $39,205.34, which included a deduction only for the usual 15 per cent for contingencies and a 25 per cent reduction for the one valid reason for termination.
Naomi Neilson
Naomi Neilson is a senior journalist with a focus on court reporting for Lawyers Weekly.
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