This short video sets out the 2 key reasons we hate cascading restraint clauses in employment agreements!
We hate cascading restraint clauses. If you wanna know why, stick around and we’ll tell you.
Hi team, it’s Simon here from The Contract Company. Contracts, that’s what we do, all day, every day and sometimes overnight, lucky us.
So, what is a cascading restraint clause and why do we hate them?
A restraint clause is usually a clause you see commonly in employment agreements. It’ll say something like, “The employee can not go on work for someone else.” I.e. a competitor of the employer in say a region for a certain period of time.
What is a Cascading Restraint Clause?
So a cascading restraint clause is a clause you see in an employment agreement that usually starts off by listing a whole lot of options.
So it’ll say something like, “Restraint area means Australia, Eastern Seaboard. C: Queensland and New South Wales. D: New South Wales. E: Sydney.
And then it’ll have something like, “Restraint period” Which will start at say two years and then go B: 18 months. C: 12 months. D: Six months.
And so what accord is meant to do is to meant to try and find an obligation that is appropriate given the employee and the circumstances by putting together the combination of the restraint period and the restraint area.
So we hate those clauses because they’re not clear and because you have to go to court to find out what combination is enforceable.
So we just don’t do them. We don’t like them, we don’t use them and I actually think they’re unfair.
So why don’t you just come up with something reasonable and three to six months is genuinely a reasonable restraint? For most people sometimes for very senior people like CEO’s, up to 12 months can be reasonable for a certain geographic area.
But beyond 12 months you’re starting to push the boundaries. Anyway, that’s just our view on cascading restraint clauses and everyone else has a different view.
At Simon from The Contract Company. Contracts that’s what we do, all day, every day. Thanks very much.
