Restraint of trade unenforceable when the employer's repudiatory breach is accepted by the employee

For the first time in Australia, a superior Court (the Victorian Court of Appeal) in Crowe Horwath (Aust) Pty Ltd v Loone [2017] VSCA 181 (see link below) has decided upon the enforceability of post-employment restraints when the employment relationship ends because of the wrongful conduct of the employer.

On the facts, the employer sought to change the employee’s position without consultation.    Further, the employer sought to change the conditions upon which the discretionary bonus was payable by not taking into account the personal circumstances of the employee.  The requirements to consult about changes to the position and to take into account the employee’s personal position when determining the discretionary bonus were both express terms of the contract. 

The Court found that the employer unilaterally varied terms of the employment contract which went to the heart of the contract and amounted to a repudiation of the contract. Nevertheless, the Company sought to enforce post-employment restraints on the employee.  

The Court recognised that if the employment had ended other than by the employer’s repudiatory conduct, the post-employment restraint would be enforceable.

Importantly, the fact that the employment contract provided that the restraints would ‘survive the termination of the Employment in all circumstances and for any reason’ did not provide a basis to maintain the enforceability of the restraints.

While the decision now sets the standard for restraints of trade and repudiatory conduct, it is a timely reminder to have regard to the contractual terms when implementing business changes.

Crowe Horwath (Aust) Pty Ltd v Loone [2017] VSCA 181 - 7 July 2017

If you would like to know more about this case, employment terms and post-employment restraints, please contact National Workplace Lawyers on (02) 9233 3989.

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Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.