In a recent decision the full Federal Court has rejected an appeal by a financial planner against a decision by the Federal Court to award damages for breach of a restraint clause in his employment contract by soliciting clients of his former employer.
The Facts
Our previous article explained that:
- A financial planner was employed by a financial planning business from December 2018 to January 2020.
- Prior to the employment he had built a client base in previous places of work.
- The employment agreement contained detailed post-employment restraint clauses which prevented the solicitation of clients whom he had serviced during the employment and also prevented accepting their business.
- After leaving the employment he established his own financial planning business and began servicing some of the clients of his previous employer.
- The former employer commenced legal proceedings for, amongst other things, damages for business loss for breach of the restraint obligations.
The Decision
The Court was satisfied that the financial planner had breached the restraint obligations of his employment contract and enforced the restraint for a 12-month period and assessed damages of $279,593.
The Appeal
The financial planner appealed on various grounds including that, during the employment, the employer had agreed that he could “take back” clients he had originally brought to the firm.
The appeal court disagreed, finding that there was no such agreement, and rejecting the appeal.
The appeal court also observed that when the financial planner entered into his employment contract he had not negotiated a “carve out” of the clients he was bringing.
Implications
The case is a reminder that:
- Employees should consider taking legal advice to understand the restraint provisions in an employment offer and consider negotiating them before agreeing to the offer.
- Well-drafted employment clauses can be an effective protection for an employer’s business.
At WorkLegal our experienced team can answer your questions and put you on the right track. A range of fixed-price Initial Consultations will suit most people’s needs in quickly learning what their options are.