As you will recall, the view of many is that enterprise bargaining in Australia has run its course. Essentially the view is that there’s little incentive for an employer to bargain (beyond avoiding harm to the business through a tumultuous bargaining campaign) nor for employees who, for some time, have only managed to extract very modest pay increases.

Modest wage growth has been a feature for some years as shown below (and note, by the way, the post GFC period 2008-2010).

Wage growth 1999-2019

The trend is similar under enterprise bargaining outcomes as the following reveals (with the 2019 growth similarly remaining flat).

Wage growth in public and private sectors

Pre COVID-19, there has been various commentary about the reasons for low wage growth with the best analysis recognising this as a worldwide phenomenon.

And now the wage outlook is worse. As the Governor of the Reserve Bank, Philip Lowe, recently stated, “With many firms delaying or cancelling wage increases, year-ended wage growth is expected to decline to below 2 per cent.”

Having worked with employers during and following the GFC, we can readily discern the following impact on enterprise bargaining:

  1. Bargaining will be stifled: there’s no or little cash out there in the private sector. So claims for job security for nominal wage outcomes will be common.
  2. Or not stifled: where a modest pay increase is agreed on a quick “rollover basis”.
  3. Short deals: particularly in the roll-over scenario. Single year deals will be seen again and often reached, informal MOU/agreements to continue the status quo.
  4. Variations to enterprise agreements: we’re seeing this now. Where employers are paying comfortably above award rates, some employers are looking for employee support to avoid the next wage increase.
  5. Terminations of agreements: less common, but for employers in distress, an option they’ll consider.
  6. Refusals to bargain: by employers, for obvious reasons.
  7. Co-operation: for a time, a greater willingness in some areas and by some unions to work in a genuinely collaborative way to ensure business and in-turn job survival.

Clearly, enterprise bargaining in the new world will be different for many. Accordingly, new thinking must follow.


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Last week I declared that most cases of employee underpayments are inadvertent and that businesses, especially large employers, are working on compliance measures.

Subsequently, we have seen more reports of underpayments by large employers. These are businesses who are conducting audits, reviewing their processes, and rectifying inadvertent errors. This is not wage-theft. They are doing the very things “asked” of them and are being pilloried nonetheless.

Here’s a shortlist, by no means comprehensive, of what employers grapple with in the quest for compliance:

  1. Multiple awards and enterprise agreements, causing uncertainty about which applies.
  2. Identifying which award actually applies as the “most appropriate” when two are capable of applying.
  3. Whether a common law contract provides for an adequate “set off” clause, such that the contract covers all payments under the award, as and when due.
  4. Monitoring casual work to ensure it is indeed “casual” work, and even then being uncertain that it is.
  5. Introducing “Bundy”-type clock-on / clock-off systems to accurately capture hours of work, only to be challenged about their legality, lest they invade “privacy”.
  6. Ensuring employees “work to the clock” and don’t self-regulate working hours (which is particularly difficult when dealing with highly motivated, outcome-­focused managers and professionals).
  7. Classifying employees correctly under an award or enterprise agreement.
  8. Ensuring salaries incorporate adequate amounts for fluctuating hours of work e.g. overtime, weekends, shift work and meal breaks.
  9. Managing payroll systems to deal with record-keeping requirements for different types of employees.
  10. Keeping records of any formal or informal agreements as to working arrangements.
  11. Ensuring external payroll providers have their systems correctly configured.
  12. Addressing flow on effects of award / enterprise agreement payment errors to other entitlements e.g. leave accruals and superannuation.
  13. Documenting employee agreement to change working arrangements on a day-to-day basis (or pay penalties under an award).
  14. Calculating personal/carer’s leave based on an average of hours worked when the law apparently requires something different.
  15. Keeping up to date with changes to awards and then interpreting the changes correctly: for example, there have been over 70 changes to the Retail Modern Award alone since 2015.

The list does not end here.

Almost daily, we read about employer failure to comply with award or enterprise agreement obligations. Opportunistically and in keeping with the sport of “business bashing”, the failure is termed “wage-theft”, as if to brand every failure deliberate and deserving of criminal sanction and as if to assume that compliance is easy.

I’m not here to condone such failures. The law is the law and it should be observed.

And it’s quite possible that in many organisations compliance has been taken for granted relying on payroll systems, often outsourced, to ensure employees are paid that which they are due.

The vast majority of failures will be inadvertent. I say this without the benefit of any data, but relying on anecdote and experience. And I’m speaking here of larger employers, being the end of the market we represent. Much of the business-bashing is from the ill-informed, or the well-informed but politically-motivated.

They might arise because a manager does what’s needed to do a job and her hours aren’t properly recorded. Or because the question of whether overtime is payable together with a shift loading is not understood. Or because employees working as casuals are not casual employees, after all. Indeed there are many opportunities for failure.

The due diligence needed by larger employers to best ensure compliance (and I stress “best ensure”) is no small exercise, demanding an understanding of which obligations exist, what they mean, and how they apply to a myriad of different ways employees might actually work. A root cause analysis for each is a major project. The controls needed to monitor compliance are extensive.

What is apparent, is that larger employers are heeding the need to be better. They are recognising that good governance demands and is demanding of better compliance.

They are reviewing their systems and processes.

They are conducting audits and typically with the help of a third party specialist together with legal support. They are rectifying shortfalls where these are identified.

Indeed there are all the hallmarks of business taking an approach to workplace compliance as they do occupational health and safety – embedded as part of everyday business.

It’s become a Board and C-suite issue, and rightly so.


Click here to see part 2 to this post.


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At first blush, time-honoured investment principles and the principles to be applied in getting good legal outcomes seem worlds apart. But after practicing law for eighteen years, and observing the financial markets, I have seen many parallels that run between the two.

The principles I touch on have been established by the greats, such as Warren Buffett (Berkshire Hathaway), Barbara Corcoran (real estate, and Shark Tank fame), Ray Dalio (Bridgewater Associates), George Soros (Soros Fund Management), Jim Simons (Renaissance Technologies) and others.

Although these great investors do not share the same methods, styles or work in the same markets, they do share common principles that are adaptable across a range of disciplines.

Harnessing successful principles from disciplines other than law provides an opportunity to shape better outcomes by looking through different paradigms. Rather than reinventing the wheel, adopt proven principles to make good decisions in complex situations.

Compound interest – the eighth wonder of the world

What Albert Einstein famously described as the eighth wonder of the world, compound interest is a game changer. Think about it like this, interest on interest is “free money” – an investor who earns a compounding return of 8% per year will double their capital every nine years, rather than 12.5 years for a non-compounding return. A 10% compounding return will double capital every seven years, rather than ten years for a non-compounding return.

This is a game-changer because it demonstrates how strong business decisions can have an exponential impact without added burden.

Strong businesses have strong foundations. These foundations are the product of many decisions, many small and some profound, which compound into building and maintaining a competitive advantage over time. The foundations of the business are made of steel. The same can be said about success in litigation. For example, strong underlying merits, front-end legal advice, clear well-drafted pleadings, foresight around how to prove an evidentiary case, and utilising the art of court-craft to present the evidence and law persuasively all lead to exponentially better results. While each small part may not seem important, dozens of well-executed decisions compound to generate an excellent result. If one or more of the elements is missing the results pull back to average.

Cover the downside – buy insurance

In the spirit of working smarter rather than harder, insurance is key to celebrating problems avoided rather than problems solved. Often we wonder whether insurance is really worth it, but for professional investors, it is the necessary cost of low risk business.

For example, an investor who spends $100 million on company shares betting they will go up has a lot to lose if they go down. The investor will typically “hedge” their position by shorting the same stock (essentially, a trading strategy using leverage that bets the value of the shares will go down) so that if the investor is wrong, the downside is covered at an acceptable price. This is a form of insurance bought because wise investors know the future is uncertain. However confident one is of an outcome, the opposite is always possible. An 80% chance of success still involves a 20% chance of failure, which can’t be dismissed with a wave of the hand.

Smart businesses buy insurance, whether for land or buildings, the use of auditing systems or use of subject matter professionals. In litigation, well thought through offers of compromise that take into account the right reference points can be worth millions. The same goes for obtaining award and enterprise agreement audit compliance advice. The cost of obtaining advice is trivial compared to the financial and non-financial costs of making wrong assumptions or failing to stress test decisions around compliance. For example, we recently provided advice for a major employer on compliance with eight different modern awards and three separate enterprise agreements. Whilst the exercise was considered costly by some, this was a smart decision as they have six separate lines of business, thousands of staff and hundreds of different roles, meaning a wrong assumption or decision can multiply on the downside before even considering the cost of reputational damage.

Another way to think about it is the front-end insurance or advice can save many multiples of its cost. Hypothetically, say front end advice or insurance costs $20k but the cost of an underpayment issue can easily reach $5m – factoring in Regulator investigations, legal costs and penalties. That is a 24,900% return on investment (ROI). Plus, insurance (such as legal costs) is a deductible tax expense, meaning the $20k turns into $12.8k “out of pocket”, lifting the ROI to 38,962%. Buying that insurance is a great decision delivering an outstanding ROI.

Ignore sunk cost

A sunk cost is one that cannot be recovered or changed, and is independent of any future costs a business may incur. If you are deciding whether to start operating a mine, the only thing that matters is whether future cash flows will exceed the costs incurred from starting to operate the mine today. Past costs incurred are irrelevant – you can’t get them back whether you start operating the mine or not. The same is often true in litigation. Deciding whether to keep investing in litigation depends on the return being sought (financial and non-financial) relative to the costs incurred from today. Particularly in a limited costs jurisdiction, sunk costs can rarely, if ever, be recovered and must be discounted from analysis. This is often a mistake that plaintiffs make – to keep doubling down and incurring additional costs long after litigation has become uneconomic.

Invest in what you know

The great Charlie Munger (the less well-known business partner of Warren Buffett) said, “Knowing that you don’t know is more useful than being brilliant”. Many investors fall into the trap of investing in things they do not understand or letting persuasive salespeople sell them a product without understanding the product or the risks involved. Professional investors avoid risk by knowing their circle of competence and staying inside it.

When it comes to legal services, it changes from “invest in what you know” to “invest in specialists that know how to solve the problem you are confronting”. In doing so, depth of expertise, track record, trust and client referrals based on personal experience are all relevant to making that decision.

Don’t worry about day-to-day market movements – it’s the trajectory that matters

Successful investors know that to manage capital, first you need to manage your emotions. When the market moves against you in the short term, you should not react negatively. In fact, if you are convinced the market is wrong and you are right, double down on your investment. Investors like Ray Dalio and George Soros have made billions backing themselves against the consensus view of a company, commodity or currency, which is always baked into its price.

The same is true in litigation. Typically, short term wins or losses in litigation don’t end up having decisive significance to the outcome, so you should not attach emotion to them. It is the underlying merits of the case, well prosecuted, that matter. Even an ultimately negative outcome, which is not based on foundational principles, can usually be corrected on appeal. As Ray Dalio says “a system optimises for the whole”. This is true for the legal system – one small part of the system may not work, or may not work on some occasions, but overall it does work well.

Judgement is the decisive skill

According to investor Naval Ravikant, no amount of glossy brochures, sophisticated sales, or talk about “smart money piling in” will ever make the underlying fundamentals of an investment any better. Neither will supposed links to successful business people as have been seen in recent scams perpetrated through social media such as Instagram. Same goes for litigation and executing legally sound commercial decisions. No amount of street smarts, technical legal expertise, hard work or court-craft will ever be able to trump the ability to triage all of that information and make a wise outcome focussed decision considering all factors. There is no substitute for good front end decisions. Judgement, above all else, is the decisive skill.


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The line between lawful and unlawful unpaid work is not always clear.

Many companies are contacted by people offering to work on a voluntary basis.  It is often pitched as a “win-win” because the person is willing to work for free in exchange for experience and contacts, particularly in high demand industries such as sports, entertainment, media or fashion.

Unpaid work remains lawful provided the person is a genuine volunteer and not an employee. However, an error of judgment can have serious consequences.

What should a responsible employer do?  When is it OK to say yes and when do they need to say no?

In the last few years, we have seen an increasing number of cases in which employers have been criticised, investigated, sued and (in some instances) fined for relying on volunteering or training arrangements to defend claims that they have not provided the legally required employment benefits. For example:

  • A media company that agreed to provide unpaid work experience to two people (at their request) was fined. Although the volunteering was found to be legitimate at the outset, it continued for over 6 months and resulted in the two workers essentially being treated as part of the regular workforce.  The Court found that the relationship had changed; meaning the workers were employees and were entitled to be paid.
  • Another media company was fined after recruiting workers to perform unpaid internship positions instead of employing them as employees. The Court ordered penalties for breaching the relevant award.
  • At least one company has entered into an enforceable undertaking with the regulator after the Fair Work Ombudsman found that its “volunteers” were actually employees.
  • A farmworker claimed employment benefits under the applicable award. The company successfully resisted the claim by demonstrating that it had always been a volunteering arrangement, and that she had applied for and accepted the role on this basis.
  • A fashion start-up and its director were fined for engaging a graphic designer as an unpaid “intern” despite having completed a university degree and working 2 days per week for almost 6 months.

Unfortunately, the line between genuine volunteering and exploitative arrangements remains controversial – with brand risks for any company that is accused of exploiting inexperienced workers.

Recent headlines have alleged that paying reduced wages to trainees can be an exploitative way of cutting costs.

In the sporting arena, a young footballer provided with an unpaid trial has sued his club saying “You don’t trial for over three months, that is ridiculous”. The club is defending the claim on the basis that the unpaid work was a genuine volunteering opportunity.

A different football club also experienced an online backlash after advertising for a nine month ‘voluntary’ assistant role. In that case, although there was some suggestion that the ad wording hadn’t reflected the intention of the role, the CEO also made the point that many full-time club staff had started out as interns.

This raises a valid question: Is volunteering becoming too high risk?

Although each case is different, for employers wanting to support people seeking experience in their chosen field, there are a number of key questions that are useful to consider:

  • If the placement is to provide work experience or learning, what training, learning experience or other benefits will the worker receive? If it is a longer placement, is this because they will spend some time in different teams or be exposed to different kinds of work?  Are they shadowing someone on a project?
  • If the placement is to provide a ‘trial’ period, how long is reasonable to demonstrate the skills required for the job? What length is appropriate? (Workers and regulators may be less likely to dispute the legitimacy of a shorter placement.)
  • How does the worker fit into the business? The risk of a claim increases if the volunteer is essentially acting as free labour as part of a paid workforce, filling a role that would otherwise be given to a paid employee.
  • What additional administrative and legal protections are needed? There are a number of duties – safe work arrangements, for example – that employers owe to volunteers as well as employees and contractors.  When dealing with staff who do not have industry experience, additional safeguards should also be considered.
  • What are the terms of the volunteering arrangement? Setting out the details in writing can clarify the boundaries, ensure everyone is on the same page about what is being proposed and agreed, and help avoid misunderstandings.

Everyone has an interest in ensuring inexperienced workers are protected from exploitation, while genuine volunteer opportunities are provided for those who want them.  Despite the trend of increasing claims and the complex regulatory framework, the good news is that the law does not block legitimate volunteering.  With careful management, this can still be a “win-win” scenario that provides benefits for both a person seeking to volunteer and a company that wants to help them out.


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Seyfarth is proud to announce the promotion of Sarah Goodhew to partner in its Sydney office. Sarah joined Seyfarth in 2015 when it established its Workplace Health and Safety practice.

Australia Managing Partner, Darren Perry, said “We are excited to have Sarah become the second lawyer to be promoted to partner since we opened our Australian practice. Having worked in workplace health and safety law for nearly 15 years, she has developed extensive knowledge in this field. Since joining Seyfarth she has become known for her practical, realistic and commercially sound advice to clients.”

Sarah is an accomplished workplace health and safety lawyer. During her career she has worked with a wide variety of clients, notably in the resources, retail and transport sectors. Sarah regularly responds to regulatory investigations, prepares and defends workplace health and safety prosecutions, and represents clients at coronial inquests.

Sarah is currently on maternity leave and will continue to work closely with Paul Cutrone on her return later in the year.

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Care or career – it doesn’t have to be a choice

Do you know which one of your nearest eight colleagues provides unpaid care for a loved one? The number of working adults who juggle unpaid carer’s responsibilities is high, hidden, and growing. Most working Aussies will have unpaid care responsibilities intrude regularly throughout their careers. Many won’t feel comfortable exercising their right to request flexible working arrangements for fear of ‘flexism’. But without appropriate support to balance work and family responsibilities, carers’ own wellbeing and productivity can suffer and in the worst case, they may exit the workforce completely.

As the demands on working carers increase, employers who create a culture of care, where the challenges for working carers are understood and flexible working arrangements are mainstream, will be best-placed to attract and retain diverse talent.

The costs of care are significant for carers and employers

The number and age range of employees with care responsibilities is expanding. Later retirement means many experienced workers also care for elderly family members. The trend towards having children later in life has created a ‘sandwich generation’ with responsibilities to care for both their young children and elderly parents, while the ‘club sandwich’ generation support parents, adult children and grandchildren! The extraordinary cost of care and shift towards at-home childcare and elder care raises the intensity of direct care responsibilities and remote ‘care management’.

The personal costs of juggling care and career are profound. The challenges faced by working carers can result in absenteeism, or presenteeism with a significant ‘distraction factor’. Unexpected, recurring or enduring disruptions to work can undermine career goals, and the burden of care responsibilities can cause severe stress and poor mental health outcomes. Many carers reduce their hours, forego career opportunities and some even leave the workforce prematurely. Most working carers are aged between 45 and 64 years old, and 35% are managers and professionals. The costs to businesses from avoidable loss of talent, experience and institutional knowledge, plus productivity and turnover costs, are too high to ignore.

Aim to think flexibly about providing flexibility

There’s a massive opportunity for employers to position themselves as employers of choice by developing an understanding of the challenges faced by carers in their workforce, and reconsidering how to facilitate flexibility to support working carers. While many employers excel at providing flexibility for carers at particular, predictable points in time (the most obvious example being for new parents), a different mix of flexible working arrangements and support mechanisms are needed to support employees whose care responsibilities can be unexpected, episodic and enduring.

National Carers Week marks the perfect opportunity to kick off the conversation. The hardest part is getting started, but the five-step roadmap below will point you in the right direction:

  1. Conduct a care census. Build an awareness and understanding of the nature and extent of the challenges employees face in balancing career and care and the areas in which they need support to successfully combine work and care.
  2. Get the team involved. Focus on team design rather than role design and collaborate on team-based flexibility solutions. Consider how the components of all team members’ roles can be covered without inconveniencing customers or colleagues and maintaining quality and service standards. Of course, this isn’t necessarily straightforward and it’s important to be fair and equitable to other staff, but it’s easier when we think of work as an outcome we produce, rather than a place or time.
  3. Find your flexibility advocates. Demonstrate to your workforce that flexible working is mainstream, gender neutral, outcome-orientated and can work at all levels.
  4. Empower leaders to have positive discussions about flexible working. Support employees’ career progression by being transparent about how compensation and promotion decisions will be handled when working flexibly, and how they can ease back into work or take on more responsibility once their caring responsibilities reduce or end.
  5. Track the take-up of flexible working options and support mechanisms for carers. If they’re not attractive, or not reaching a particular group within the broader population of carers, keep exploring opportunities and trying other alternatives.

Flex-agility is the way of the future workplace

Undertaking a care census and revisiting the flexibility options can help employers to future-proof the workplace by supporting employees to balance care responsibilities with work as the need arises throughout their career. Building a culture of care and designing appropriate supports for carers in the workplace is a complex, long-term undertaking. But the sooner that employers discover how best to support working carers, the more they stand to gain from allowing them to reach their performance potential. In turn, the more that flexible work arrangements are role-modelled as mainstream, the better an employer’s prospects for attracting and retaining a talented and diverse workforce going forward.

When an ex-employee goes to a competitor or starts poaching clients or staff, employers often look to a restraint of trade clause to protect key business assets such as client relationships or company confidential information.

Often a quick decision needs to be made: apply to the Court to stop the ex-employee, or wait and sue for breach of contract damages at some later time. Wrapped up in this decision is the important issue of prospects of success – an employer will want to know there is a good chance of a successful outcome.

Whilst there is a general perception that restraints of trade are difficult to enforce (some lawyers even hold the blanket view that they are never enforceable) the only empirical study of Australian court judgments (Chia and Ramsay, 2016), which looked at all restraint of trade cases that went to final court determination in the period 1989 to 2012, found that the outcome across all cases in Australia in that period was:

  • The Court enforced the restraint 46.2% of the time
  • The Court found the restraint valid 17.2% of the time, but did not make enforcement orders (usually because the Court found no breach of the restraint or the employer suffered no damage)
  • The Court found the restraint invalid 36.5% of the time

The State/Territory breakdown found that NSW had the highest enforcement success rate (56.1%) whilst Victoria had an enforcement success rate of 30.7% and a finding that a restraint was valid (but not enforced) of a further 15%, meaning that the Court ruled the restraint invalid in 53% of cases.

Enforcing restraints of trade
Enforcement of restraints of trade in New South Wales and Victoria

There are at least a couple of reasons why NSW has a higher enforcement rate than Victoria. First, there is specific legislation in place that empowers a court to construe and read down a restraint that is excessive to reduce its operation to that of a reasonable protection, so long as that protection is within the confines of the restraint agreed between the parties. There is some qualitative evidence (Arup et al., 2013) to suggest that NSW is being nominated as the jurisdiction governing the contract to take advantage of this legislation. Second, NSW is a bigger State than Victoria with more employees, and the financial services and insurance industries, which are over-represented in restraint cases, are larger in NSW and hence generate more litigation.

I suspect these numbers – Australia wide and State by State – show odds of success that are much higher than is the general perception.  These aggregate numbers also leave out successful settlement negotiations prior to trial – it is not uncommon to agree a fresh restraint by consent, or some other compromise, rather than proceeding to final hearing.

The best decisions, including whether to start a legal action or not, are made by combining human expertise, experience and instinct, and objective data. The human experience allows us to weigh complex trade-offs and risks in pursuit of an objective. The objective data helps us to make decisions free of biases, many of which are subconscious.

Of course, every case is different and success in any individual matter has many essential ingredients. This aggregate data is useful in that it shows that an ex-employee’s restraint can be an effective tool to protect business assets. It is always a matter of ensuring that the essential ingredients, covered in other blog posts are present.

Lots has been said recently in the press about enterprise agreement making and the approval process by the Fair Work Commission (FWC). In short, the numbers of agreements being made is down and approval times are “long”. The graph below, recently cited in an AFR article, demonstrates a possible link between approval times slowing and a Full Bench decision involving Coles. But the numbers are turning.

It’s not the only decision at play and it’s far from the whole story.

A steady stream of Federal Court decisions has effectively set the level of scrutiny that the FWC must apply – scrutiny which puts high demands on the FWC and in-turn those seeking approvals. Delays are inevitable, particularly given the FWC works with the parties on curing approval defects where possible. In effect, the FWC often does the work of the parties to ensure the approval requirements are met. Bear in mind that there are between 3,000-5,000 agreements to approve each year. Each approval requires over 30 requirements to be met, necessitating more than simply a “tick box” to deliver on the legislative charter. To suggest that this is a simple “rubber-stamping” process is wrong. There are 43 Fair Work Commission members who are charged with this.

We recently prophesied that the numbers would turn. Recent statistics from the FWC bear this out. A legislative change late last year enabling the FWC to approve agreements in a way that overlooks “minor procedural or technical errors” is enabling faster approval times. The corollary of this is that the FWC must still identify but, can overlook, errors made by parties who file agreements that do not meet the legal requirements.

In time this will probably see many an employer becoming even more blasé about the agreement-making requirements, because the FWC can more readily come to the rescue. But with all the criticism levelled at the FWC at approval delays, its patience and willingness to work with the parties to ensure approval might be tested. In other words, will we see non-compliant agreements more readily rejected, rather than time taken to clarify certain facts or fixing application errors?

An enforceable restraint of trade can be a key business asset, giving an employer time to recover when a senior employee has left the business for a competitor. Like a good insurance policy, it’s a big relief to have it when you need it.

Australian law regarding restraints of trade has its history in 19th Century England and the prevailing concerns of that time.  Of course the law has developed incrementally since then. However, by and large, an employee restraint protects certain interests within defined geographical boundaries such as a city, state or country.  This made sense in a bricks and mortar world of commerce, but how can employers protect their interests in the modern digital economy?

We have worked with a range of clients to protect their interests across borders. Novel thinking is required to draft employment restraints so that they are effective within the established legal framework.  Our Australian Partners have litigated hundreds of restraint of trade cases and have developed a deep understanding of the issues and what it takes to win.  We share some thoughts below:

1. Ensure restraints protect the right cyber micro-markets

Cyber-markets can be broken down into many possible divisions: by country location, product or service, individual seller/retailer website, personal characteristics of the consumer (age, gender, occupation, hobbies) among other things. What this means is there are sections within any market which a departing employee may lawfully target which will not affect an employer’s current business.  Say, for example, an employer operates an online gambling business for rugby and AFL which serves clients in Australian capital cities but does not offer services for online horse racing in the UK.  A departing employee might be able to set up a competing website, also operating geographically from Australia, to offer online gambling in UK horse racing. The cyber micro-markets are different, so the two companies are not competing in that market.  But there is room for a restraint to work in areas of overlap subject to the terms of the restraint covering the correct cyber micro-markets.

2. Confining an employer’s cyber-trade interest to its client list

Where an employer provides a range of services in a cyber micro-market, the most efficient and clear way to protect its interests – for example, the legitimate interest of client connections, may be naming particular clients in a market, along with other appropriate terms.  This type of drafting can be effective to protect relationships built with particular clients situated within defined boundaries.

3. Enforcing cyber-market restraints where an employee engages in cyber-trading within the boundaries of an enforceable geographic restraint

Essentially, this means that an employer who reasonably restrains employees by geographical restraints is to be entitled to have this capture cyber-business within the geographical restraint.  For example, an employer can protect its interest in client connections regarding their telemedicine counselling services provided to public and private hospitals in, say, Sydney and Melbourne against former employees providing competing services to customers in these locations for a certain period of time, but would not be entitled to restrain a former employee from providing the same services to patients in aged-care homes in Perth, Adelaide or the United States.  A restraint will be effective so long as it is well drafted and ensures that providing services to clients through the internet within this geographic boundary is prohibited.

The above framework for drafting restraints supports the following public policy benefits:

  • ensuring a level of trade and (not unfair) competition while offering reasonable protection of an employer’s legitimate interests; and
  • allowing markets to grow and prosper for the benefit of consumers.

Keep enforcement front of mind where cross-border litigation is a possibility

 A cyber-restraint, like the internet itself, is a global construct.  But courts are country and state based and their jurisdiction is usually limited by geography.  That made sense when most trade was local but can be problematic when trying to enforce a restraint across borders.

A 2017 decision of the Western Australia Supreme Court provides an example.  Naiad, a U.S. employer sought an interlocutory injunction to restrain a defecting employee from operating a competing business in Western Australia. After grappling with the applicable law and jurisdiction, the Court concluded that the reasonableness of the restraint was governed by US (Connecticut) legal principles (given particular terms of the contract) but the grant of an injunction was governed by Western Australian law.

The situation is complicated because some countries (for example, Australia and the United Kingdom) have arrangements in place to recognise each other’s Court judgments and orders meaning that international litigation encounters less problems.  But this is not so as between many other countries.  The upshot is that it is important to consider how a restraint term will be enforced up front. Otherwise, there may be a right but no real way to achieve a remedy.

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