The Court of Appeal (Justice Beach, Justice Ferguson and Justice Riordan) today dismissed an appeal by Just Group Ltd against the dismissal of its claim to prevent its former CFO, Ms Nicole Peck, from taking up employment with Cotton On. Just Group contended the proposed employment was in breach of a restraint clause in its employment agreement with Ms Peck.
A clause, restraining an employee with respect to future employment is void as a restraint of trade unless there are special circumstances that demonstrate that the clause is reasonably imposed to protect a legitimate interest of the employer (e.g. confidential information).
Ms Peck contended that the clause in her contract restraining her from the employment referred to in it was unreasonable. Just Group contended that the restraint was reasonable in the circumstances and that if any part was held to be unreasonable, it could be crossed out with a blue pen (i.e. severed) so as to still prevent Ms Peck from taking up employment with Cotton On.
The Court found that the clause extended beyond what was reasonably required for Just Group's protection because:
(a) the first limb of the clause restrained Ms Peck from being involved in a business that competed with a part of the Just Group, with which she had been involved, regardless of whether the confidential information was relevant to that business; and
(b) the second limb of the clause restrained Ms Peck from being involved in 50 entities or brands where, in respect of at least 46 of them, there was no proof of competition or relevance of the confidential information.
The Court also held that it was not appropriate to cross out words from the contract that, if crossed out, might have left a valid restraint clause.