Legal Alert

MISSING EMPLOYMENT CONTRACT CRUELS REALTOR’S RESTRAINT CASE

Authors: Justin Pen & Amy Zhang

The New South Wales Court of Appeal has recently issued a forceful reminder that employers should take care in both drafting and maintaining copies of their employees’ contracts of employment, particularly when seeking to enforce restraints of trade and confidentiality obligations.

In Agha v Devine Real Estate Concord Pty Ltd & Ors [2021] NSWCA 29, the Court considered appeals from the New South Wales Supreme Court from a pair of real estate agents, Mr Lewis Coombe and Mr Wajih Agha, in relation to restraint of trade clauses and confidentiality obligations that had been found to be enforceable against them.

In the case of Mr Coombe, the Court of Appeal held that the trial judge had erred in finding that Mr Coombe had executed a contract of employment in circumstances where his employer could not locate a copy of his contract in his employee file. Because the Court of Appeal rejected this finding, Mr Coombe was found to not be bound by an express contractual restraint of trade or confidentiality obligations, because no contract of employment had been found to exist.

In the case of Mr Agha, there was no issue that Mr Agha was bound by a contract of employment that contained express clauses in relation to his employment and post-employment obligations. The Court of Appeal found that Mr Agha’s express contractual obligations, which restricted Mr Agha from working for a period of three years within a six-kilometre radius of the realtor’s offices, were reasonable and enforceable based on the fact of Mr Agha’s seniority and position as a past shareholder.

Further, the Court of Appeal observed that Mr Agha’s contractual confidentiality obligations could permissibly be broader than what the laws of equity would ordinarily recognise. It also followed that, even if such confidential information lost its protection in equity (including, for example, if the confidential information entered the public domain), a party’s contractual protections would continue to have force.

The decision provides some plain, but significant, lessons for employers:

• First, it is essential to keep and maintain copies of employees’ contracts of employment.
• Secondly, it is always beneficial to carefully draft into an employee’s contract of employment restraints of trade clauses and confidential information clauses.
• Thirdly, regard should be had to an employee’s position within the company when doing so.

If you require any assistance with drafting or enforcing employment contracts, please do not hesitate to contact our team of specialists.

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