Restraints of trade in an NDIS era

Most employers are aware that restraints or restrictive covenants in employment contracts are notoriously difficult to enforce.  Generally, provisions which impose restrictions on a person’s ability to make a living are void and unenforceable (because such a restriction is seen as unreasonable from a public policy perspective).  Despite this, a restraint is enforceable to the minimum extent which the employer demonstrates is reasonably necessary to protect the employer’s legitimate business interests (such as the protection of its goodwill and trade secrets and its relationships with key employees and clients).

Of course, the enforceability of any restraint is dependent on many factors which are often unique to the particular circumstances of each case.  Generally though, where the employer can show that the restraint is reasonable and not excessive, there will be no significant public policy consideration preventing enforcement of the restraint.

However, is this the case when it comes to the NDIS?  A key principle underpinning the NDIS strategy is the autonomy of the individual receiving the services and their freedom to choose their own service provider.  This consumer-driven care focus echoes in part the principles underpinning the United Nations Convention on the Rights of Persons with Disabilities, ratified in Australia in 2008.  As a result, there is a strong argument that an NDIS recipient’s interest in receiving continuity of care with the front-line carer of their choosing is a clear public policy consideration which would outweigh the interests of the parties to the restraint.  If that is the case, a restraint which seeks to prevent an ex-employee from servicing the employer’s NDIS clients post-employment would likely be unenforceable (at least so far as it applies to the NDIS clients).

To our knowledge, this has not yet been judicially tested.  In our view, this is a significant public policy consideration which may well pose a problem for NDIS service providers seeking to protect NDIS client relationships.

Nevertheless, employers should continue to put themselves in the best position possible by including a well-drafted restraint in their employment contracts.  However, given the possibility that a restraint against ‘poaching’ NDIS clients may not be enforceable, employers should also consider including provision in relevant employment contracts for agreed or liquidated damages to be paid by an ex-employee should they do so.  The agreed damages must be no more than a genuine and reasonable pre-estimate of the damages that the employer would likely suffer if the restraint was breached.  In addition to providing a deterrent to such activities, an agreed damages clause can give employers some recourse should ex-employees seek to take advantage of the opportunities provided to them during employment to make contact and build relationships with the employer’s NDIS clients.

2019-06-27T10:33:00+00:00June 27th, 2019|