Post-termination restrictions in employment contracts (3) – Enforce-ability of PTRs
03 Aug
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Enforce-ability of PTRs The question of the enforce-ability of PTRs is now fairly settled. There are, broadly speaking, three key principles as follows:
The court will decide what the PTR means, when properly construed
The court will consider whether the employer has shown a legitimate interest to protect in relation to that employee’s employment. Employers’ interests which are capable of protection by a PTR falls into main categories: customer connection and trade secrets and/or other confidential information.
If the existence of the protectable interest is established, the PTR must, in order to be upheld, be shown to be no wider than is reasonably necessary for the protection of that interest. The assessment of reasonableness will be carried out from the perspective of reasonable persons in the parties’ position as at the date the employment contract was entered into and that reasonableness must equally exist at the date upon which the PTR is sought to be enforced
If a PTR is held to be unreasonable, it will be struck down and will not be enforced unless the offending parts can be severed by applying the “BLUE PENCIL” test. The court cannot enforce a restriction of lesser extent which would have been reasonable. However, if only part of a PTR is unreasonable, individual words or phrases may be ignored, so permitting a reasonable call to stand.