Employment Spotlight: Post-Termination Restraints In Hong Kong – Wilson Cheung Looks At Some Key Issues Surrounding Post-Termination Restraints In Hong Kong

Author:Mr Wilson Cheung and Andrea Randall
Profession:Gall
 
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Restriction on Employee's Activities Post-termination

It is common to find employers imposing post-termination restraints ("PTRs") on employees in order to restrict the post-termination activities of the employees with the aim of protecting the employer's businesses. Post-termination restrictions are often used by employers to restrict an employee from:-

joining competitors; poaching employees; soliciting clients or customers; or dealing with clients or suppliers. Whether or not a PTR is enforceable is a common question posed by clients such as employees who are considering joining a competitor, a competitor seeking to poach an employee as well as employers wishing to seek enforcement of the PTR against a recently departed employee.

Enforceability of PTRs

It is trite that PTRs which amount to restraint on trade are prima facie void and unenforceable. The courts will enforce such PTRs only where it can be shown such restrictions are for the reasonable protection of the employer's legitimate interests and are no wider than reasonably necessary.

The courts have emphasised that the application of familiar principles is highly sensitive to the individual facts of each case. Accordingly, precedents are a helpful barometer of enforceability but are not determinative.

Consequences of a PTR being held unreasonable

If a PTR is held to be unreasonable, it will be struck down and will not be enforced unless the offending parts can be severed without changing the character of the clause. The courts cannot enforce a restriction of lesser extent which would have been...

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