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A major provider of HR services hired an employee who was subject to a restraint, under an employment contract, in favour of a former employer.

Employee’s Explanation

The employee, a BDM, told his new employer that he had not taken any intellectual property belonging to his former employer and that his restraint clause, under his employment contract, was only for six months.

Actual Situation

The new employer later found out that the employee had taken a USB containing the previous employer’s confidential information and that he had distributed it to his new colleagues.

New Employer’s Response

Although the new employer originally was funding the litigation the employee was facing from his previous employer, after the actual situation became apparent:

  • he was given the option to resign or have his employment terminated
  • he resigned and settled his case with the previous employer

Sting for New Employer

The previous employer sought a costs order against the new employer for the proceedings it started against the employee. In an unusual move, the court granted the order because of the willingness of the new employer to be involved in the litigation and the likelihood of the previous employer’s success if the case against the employee had proceeded to trial.


Tips for Employers

The case sends a warning to employers that:

  • they need to KNOW about all former restraints contained in the employees employment contract
  • they should NOT induce a breach of those restraints contained in the employees employment contract
  • they need to consider INCLUDING relevant warranties in employment contracts


More Information

For employment advice on employment contracts, restraints of trade and whether or how they apply to your employees, consult a workplace law expert or an experienced HR lawyer.

Please call the leading employment lawyers in Parramatta, the Matthews Folbigg Workplace Solutions team on 9635-7966 to speak with one of our employment lawyers about your employment law issues.