Employee restraints of trade – are they enforceable?

Posted on July 12th, 2017

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The case of Thinkstorm Pty Ltd v Farah [2017] NSWSC 11 recently addressed the issues of employment restraints and their enforceability in the context of employment contracts.

The facts of the case involved the employer (Thinkstorm) seeking to enforce a restraint of trade provision by way of injunction against one of its previous employees (Farah). Farah had worked for Thinkstorm as a computer engineer using the computer software known as WorkBrain and provided services to Queensland Health on behalf of Thinkstorm. Farah’s employment contract contained a generic restraint of trade clause providing that Farah must not directly or indirectly, for a period of 12 months following the termination of his employment, solicit, canvass, deal with or approach any person, firm or company for which Thinkstorm provided goods or services to at any time during the last 12 months of Farah’s employment with Thinkstorm. Immediately following Farah’s resignation from Thinkstorm, Farah accepted an employment contract with Queensland Health. 

Lindsay J confirmed the well-established principles in relation to the enforceability of restraints of trade in the context of employment contracts, namely:


  • At common law, a restraint of trade is contrary to public policy and void, unless it is justified by the special circumstances of the particular case, for which purpose it is sufficient justification that the restriction is reasonable having regard to the interests of the parties concerned and in reference to the interests of the public. If the restraint is not reasonable in reference to the interests of the parties and the public, it is contrary to public policy and void.
  • The test reconciles two conflicting policies, first, that a man should be free to use his skill and experience to the best advantage and should not be put in a position of a slave and, second, that covenants should be observed and enforced.
  • While Courts commence from the same general principle in all cases of restraint of trade, a more rigorous approach is applied to restraints in employment contracts then in contracts for the sale of goodwill. A stricter and less favourable view is taken of covenants in restraint of trade between employer and employee than in commercial agreements.
  • An employer is not entitled to be protected against mere competition. The only legitimate interests of an employer which may be the subject of protection are in the nature of proprietary subject matter including the employer’s trade secrets, confidential information and goodwill including customer connections.


Lindsay J found that the greatest potential weakness Thinkstorm faced in enforcing the restraint of trade was that the restraint of trade operated for a duration of 12 months following termination. This appears to be at the outer limits of what would be a restraint of a reasonable duration. Lindsay J noted that Farah’s specific skill set, expertise and high remuneration played in favour of the enforceability of the restraint.

The Court found in favour of Thinkstorm on the basis that the goodwill of the customer connection was a protectable interest and the restraint of trade provision was required by Thinkstorm to protect itself against an employee, who following placement, might change his or her employment to cut out the business of Thinkstorm. The Court ordered that Farah be restrained for a period of 12 months from performing any services involving the use of Workbrain software for the payroll portfolio section of Queensland Health. Farah was ordered to pay Thinkstorm costs.

Lachlan Page, Solicitor at Mullane & Lindsay Solicitors, NewcastleLachlan Page is a Solicitor at Mullane & Lindsay Solicitors and practices extensively in commercial, business and property transactions and adviceIf you require any assistance in this area please contact Lachlan Page to arrange a consultation or contact our Newcastle office.

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