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Employment Law - Restraint of Trade - Cascading Clauses

Date: December 20, 2010

Authors: LAC Lawyers

Restraint of trade has garnered an ever increasing amount of attention over the past few years as employers attempt to restrain former employees in their conduct after they leave their employ. The purpose of such a clause is to protect the custom of the previous employer. Generally restraint of trade clauses are void against public policy unless the restraint is necessary for the purpose of protecting the legitimate business of the previous employer.

A recent trend in the employment circle has been the introduction of a clause known as a cascading clause. A cascading clause is defined as a clause that provides a number of options in regards to time and areas of coverage of the restraint of trade clause.

Recent court decision has considered the validity of cascading clauses in an employment contract and in a recent decision the court considered the issue whether the cascading clauses can be severed from the rest of the cascading clauses. The court will consider each clause separately and whether the clauses are inconsistent with each other. In the above case the court decided that the clauses could be read separately and therefore valid. Other cases have concluded that the cascading clauses are invalid as the employee is unaware of the nature of the restraint and this would causes difficulty in the assessment of the validity of such a clause.

It appears that the court will consider the cascading clauses to be valid when the clauses are clear and unambiguous which does not require the intervention of the court in interpreting the cascading clauses. In addition, the court will also consider the period in which the restraint of trade is to operate. The court held that a 12 month period was reasonable for the protection of the business. The question of reasonableness is to be decided upon the facts of each particular case.

One would need to consider the issue in relation to cascading clauses prior to them being inserted into the contract of employment.

At LAC Lawyers Pty Ltd, we are able to assess your situation and provide you with a comprehensive opinion as to the proper cascading clauses to be included in the contract of employment.

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