Meaning of “restraint of trade” contract terms?

Question

In a consulting contract is a section on "Restraint of Trade."

I've included the entire section for reference but the parts I don't understand are in bold.

12 RESTRAINT OF TRADE

12.1 COMPANY_NAME has built a solid reputation for the quality of service and reliability of supply for information technology professional services. Accordingly, you acknowledges that it is fair and reasonable to enter the following covenants to protect the goodwill of COMPANY_NAME.

12.2 You must not, in any capacity (including as Consultant, independent contractor, consultant, principal, agent, director, joint venture, partner, trustee, beneficiary), directly or indirectly:

12.2.1 During the Restraint Period and in the Restraint Area, for any reason, perform work for, or provide services to, or attempt to solicit the business of the Client or any person or entity who was a client of COMPANY_NAME, or any of its related entities, and with whom you had direct dealings in the last 12 months of your employment with COMPANY_NAME. Reference to “client” in this clause, as it relates to federal and state governments, will be limited to actual departments or divisions of governments who were customers of COMPANY_NAME in the last 12 months of your employment with COMPANY_NAME.

12.2.2 During the Restraint Period, encourage or attempt to solicit any Consultant, employee or independent contractor who provides, or provided, services to COMPANY_NAME, and related entities, and with whom you had direct dealings in the last 12 months of your employment with COMPANY_NAME, to cease being employed by COMPANY_NAME.

12.3 For the purposes of clause 12.2, the Restraint Period is each of the following periods after termination of your employment with COMPANY_NAME:

12.3.1 12 months;

12.3.2 6 months;

12.3.3 3 months.

12.4 For the purposes of clause 12.2, the Restraint Area is each of the following areas:

12.4.1 Within the State of the premises at which you were primarily employed;

12.4.2 Within 50 kilometres of the premises at which you were primarily employed; and

12.4.3 Within 15 kilometres of the premises at which you were primarily employed.

12.5 Each of these separate provisions operates concurrently and independently.

12.6 If any separate provision referred to in this clause is unenforceable, illegal or void, that provision is severed and the other provisions remain in force.

12.7 If any separate provision in this clause is unenforceable, illegal or void in a jurisdiction but not in another jurisdiction, then that provision is severed only in respect of the operation of this Agreement in the jurisdiction where it is unenforceable, illegal or void.

My understanding is obviously they don't want me being poached by the client but the time and distance factors are unclear. Does this mean I can't even work in the same city as the client for up to 12 months? 12.6 and 12.7 almost looks as if they're just fishing to see if any of these are invalid then the next one down will apply. How should I interpret this?

The country is Australia.

Answer 1

First, the restraint is on you working is for a client with whom you had direct dealings within the last 12 months of your employment (see 12.2.1) or your poaching any of your colleagues (see 12.2.2)

Second, as written, you can't do that in the same state. However, that is because they clearly have the subclauses of 12.4 in the wrong order. If this is fixed then the limitations are 12 months for a 15km radius, 6 months for a 50km radius and 3 months for the same state.

Third, 12.6 and 12.7 are pretty standard types of clauses (although I've not seen something like 12.7 before). The reason they are here is because restraint of trade clauses are void if they exceed what is reasonable to protect the legitimate interests of the business. Overall, this doesn't seem too broad although geographic limits on "technology professional services" may be useless on someone who can work remotely.

Answer 2

While you personally may not be able to solicit them, there is nothing stopping them from employing the services of a registered company that sub-contracts work to you. As you did not take direct or indirect action in gaining or procuring the contract to the work that you are sub-contracted under, the clause wouldn't cover competition or solicitation in that specific case. Further, considering your status as an independent contractor, a court may consider several aspects such as remuneration or compensation for the restraint, your bargaining position, as well as the duration or geographical restraint position. However the onus is on the party seeking to enforce the clause in court, which may be hard to do under certain circumstances. For example it may be unreasonable to ban you from working in a niche industry within your city if that's where your life is, and enforcing the clause would cause an unreasonable burden upon you to conduct business .