A restraint clause in an executive’s contract of employment has provided an employer an additional 3 months protection from competition after the employee resigned to take up a job offer with a direct competitor.
On 1 August 2016 the NSW Supreme Court handed down its decision in a case brought on by port operator, DP World, against its former GM Operations, Port Botany, Mr Guy, who had resigned to take up a similar role at the same port location, with its direct competitor Patrick Stevedores, a subsidiary of Asciano.
Fortunately, DP World’s contract of employment with Mr Guy was well drafted, and accordingly, when Mr Guy handed in his resignation he was placed on 3 months ‘gardening leave’ under the Termination clause and advised he would then be subject to an additional 3 months ‘post-employment restraint’ under the contract’s Restraint clause.
When the matter was taken to Court to enforce these post-employment obligations, Judge White rejected Mr Guy’s contention that the 3 month gardening leave should count towards the 3 month restraint period, holding the contract wording made it quite clear he needed to serve both periods, not just the first.
Given Mr Guy’s ability to cause substantial damage to his employer had he been able to go directly to a competitor armed with considerable amounts of highly sensitive confidential information about clients, pricing, operational strategies etc., the 6 months restraint provided by his contact would have given his employer valuable time to mitigate the impact of his departure.
All your senior staff need to have up to date contracts of employment to maximise the protection afforded should they decide at some time to move on, especially if this is to a direct competitor.
DP World Sydney Ltd v Guy  NSWSC 1072