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Restraints of trade and proprietary interests

A restraint of trade can only protect an employer’s ‘proprietary interests’. What is a proprietary interest?  

The employer must be able to identify an advantage or asset inherent in its business which can be regarded as, in the general sense, ‘property’.  The basic legal question is “Would it be unjust to allow the employee to appropriate this for their own purposes?” Stenhouse Australia Ltd v Philips [1974].
The courts have considered the following to be proprietary interests capable of protection by a restraint of trade:
 
  •   Confidential information                                                               
  •   Trade secrets
  •   Customer lists
  •   Customer connections
  •   Quotes
  •   Correspondence between clients
  •   Product lines
  •   Chemical formulate of a product
  •   Budget forecasts
  •   Specific accounting information
  •   Pricing policies
  •   Stock levels
  •   Sales targets
  •   Marketing and sales strategies
  •   Information about budgets, promotions and market surveys
  •   Workforce stability
  •   Discoveries and inventions made during employment
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What isn’t a proprietary interest?

A simple desire to prevent competition is not a proprietary interest.

Generally, an employee cannot be restrained from using their own skills or knowledge. Skills and knowledge gained during employment may, or may not, be determined to be a proprietary interest capable of protection (depending on the facts). The onus is on the employer to establish that it (the employer) has some proprietary interest in any skill of knowledge held by the departing employee. The Employment Court recently noted that “the law jealously guards the right of employees to pursue their chosen occupation and earn a living and this right will not be lightly interrupted by the Courts” Asiaciti Trust New Zealand Ltd v Harris


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