Just Group Ltd is a prominent fashion and apparel retailer that owns the brands Just Jeans, Peter Alexander, Portmans and many others. Ms Nicole Peck was their Chief Financial Officer in the early part of 2016, being paid $450,000.00 a year. However, after just a few months of working for Just Group, Ms Peck sought greener pastures with a fashion rival, Cotton On.
Just Group sought retribution, seeking to enforce several “post-employment restraints” in Ms Peck’s employment contract, which are clauses that stop an employee from working for a rival business even after their employment contract has ended. However, in Just Group Ltd v Peck [2016] VSC 614, the Supreme Court of Victoria found the post-employment restraints to be just too much. They were unreasonable, and so they were invalid and unenforceable.
The Post-Employment Restraint Clauses
The clauses in Ms Peck’s contract meant that she could not be involved in any activity which was the same as, or similar to, any part of Just Group’s business in which she was involved or in which she received confidential information.
She would also not be allowed to work for a list of 50 other brands and their controlling entities in Australia and New Zealand. That list included businesses like David Jones, Myer, and Country Road. It also included Cotton On.
These restraints on Ms Peck were to last for 24 months after her employment with Just Group.
Just Group takes Action
Just Group commenced legal proceedings to stop Ms Peck from working for Cotton On. It argued that it needed to protect its confidential information and commercial interests.
The Post-Employment Restraints Were Just Too Much
The Court acknowledged that Just Group had a legitimate interest in protecting its confidential information. However, the restraint clauses went beyond what was reasonable to protect that interest. In particular, the restraint clauses would prevent Ms Peck from working in a role completely unrelated to Just Group’s confidential information, as long as her prospective employer itself was similar to Just Group. For example, Ms Peck would be prevented from working as a sales assistant in a small Cotton On outlet, even though that role would not require use of Just Group’s confidential information.
The restraint clauses would also prevent Ms Peck from working for a list of 50 other brands and their controlling entities. That list included those that did not deal solely in fashion, such as Big W and its controlling entity, Woolworths Ltd. For example, Woolworths Ltd also has substantial liquor retailing businesses. Restraining Ms Peck from working for any of the 50 brands and their controlling entities was unreasonable because Just Group is a fashion and apparel retailer, and the list included businesses that deal with much more than just fashion. Just Group was trying to restrain Ms Peck from working in businesses that weren’t even its rivals, and that was unreasonable.
Finally, Ms Peck was allowed to work
The Supreme Court of Victoria found the post-employment restraints to be so unreasonable that it did not matter that Ms Peck negotiated her contract or that the contract itself labelled the restraint clauses as reasonable. No matter the label, they were unreasonable and invalid. Finally, Ms Peck was allowed to work for Cotton On.
Businesses are entitled to protect their confidential information and commercial interests. However, they need to be fair to their employees too. Post-employment restraint clauses can severely impact on an employee’s right to work and support themselves.
Please contact our offices if you require restraint of trade legal advice.