Recent decision by Victorian Court of Appeal may affect drafting of post-employment restraints

A recent decision by the Victorian Court of Appeal confirms the willingness of courts to uphold reasonable post-employment restraints agreed to by employees of professional services firms.

The post-employment restraint at issue in Birdanco Nominees Pty Ltd v Money [2012] VSCA 64 (4 April 2012) provided that Mr Money would not, for a period of three years after his employment,  provide accounting services to clients to whom he had provided accounting services during the three years before his employment ceased.  It also provided for liquidated damages in the event of a breach calculated as 75% of the fees incurred by the client(s) in the last full financial year in which the client(s) had remained clients of the employer firm.  The Court of Appeal overturned the decision of the County Court and held that such a restraint was reasonable, and further that the liquidated damages clause was enforceable.  The terms of the post-employment restraint, which are set out in full in the decision, may assist those asked to draft or consider such restraints, particularly given that it allowed the former employer to rely on a liquidated damages clause rather than establish actual loss.

Commentary on post-employment restraints for employees is provided at section 3.4.4 of the ‘Employment Law Guide‘.

Written by Paul Moorehouse who is also a co-author of Smokeball’s ’Employment Law Guide‘.