Restraint of trade clause - question

[AndyD]

I don't think you're missing anything. Unless there's something we're not aware of, I can't see any reason the agreement wouldn't hold water in this case either.

[Duncan]

Dave & Andy, i agree nothing missed there. Its a bit like closing the stable door after the horse has bolted.
What i note from this is that while he was a partner he was also employed in the business. The exit agreement should have been handled by a competent lawyer who would have noted that the payment for fixtures and fittings, while equivalent to 6 months salary was actually legally due to the exiting member as he was a share holder. An amount of compensation should have been covered there for goodwill in the business but this is not normally a lot unless there are signed contracts with a monetary value attached to them.
The bottom line here, to me and in my limited opinion, is that he was not an employee in the sense but a partner and the agreement of restraint here is far more contractual and enforceable than one designed for an employee. A good lawyer would have seen to it that he was protected and got the best deal but often one doesn't go that route due to costs, lack of experience and our ability to trust people to do the right thing.
Funny how 18 years ago i signed an employment contract that had a restraint of trade clause. I knew then that it really was worth anything to the employer as he cannot take away my ability to earn an income. Now i have been self employed, running my business's for the last 5 years, if i had to be offered employment with a clause i would fight it, i suppose knowing that i can easily go back to been self employed. Its really a fear based decision and a lot of employers know that they can try and push this onto employees, as there are not a lot of jobs out there, so jumping ship isn't always an option.
One final word of advice, make sure they are a good lawyer and experienced in this area. I have used two of SA's biggest law firms and have been disappointed with the individual lawyer's ability and negotiation skills and it cost me a lot of money in the end.

[desA]

There seems to be something in the SA mentality - control & domination - that introduce these clauses into agreements, in the first place. Their basis is clearly unethical, except in a narrow range of circumstances.

From my extensive travels abroad, I find this kind of activity to be offensive, to say the very least. I have not seen it to be the norm in other countries. Generally the societal norms & ethics prevail.

Should potential partners attempt to bring this kind of stuff to the table, I would walk away in principle.

[Pap_sak]

I disagree Des. Lets take this as an example. The OP now has a great advantage over the now total owner..I am going to call him TO. As we all know when opening a new business there is a steep learning curve and you never get it right the first time. Maybe the shop is to big, maybe too small, maybe the wrong location, maybe not enough customers in town to service the business, maybe the rent is too high. The OP now has all that, where the TO is stuck with it.

The OP now wants to use that information to take business away from the TO after they came to an mutual agreement. I hope the original agreement sticks, I think the OP should stick to it and not run to a lawyer looking for loopholes. I would love to know what he would say if the tables where reversed.

It's a pity that we have lost the " my word is my bond" and now expect lawyers to fight our battles. Bad form, IMO.

[desA]

I respectfully counter.

Controlling sensitive business information & trade secrets is different to a restraint of trade on an individual. This aspect can be adequately managed without preventing the person from plying their trade, or launching an entirely new operation. His learning up to that point would also have come at great expense to himself.

If this malarky were applied, for instance, in the computer hard-disk industry, history would show that no innovation would have taken place outside of the original colossal designs. The industry spawned & continued to spawn new entrepreneurs. Interestingly-enough, many of the original names are still around.

This control & dominate philosophy runs counter to free-trade & capitalist philosophy.

[Pap_sak]

My impression is that this is a smallish town that can maybe only support one/two optometrists. Do you agree that the OP will now have an unfair advantage with his insider knowledge? Will his opening have an effect on the TO?

I guess we do not have the overall picture an the town might be quite large with numerous optometrists in which case I might think differently, but even then at the end of the day that doesn't change the fact that the OP agreed to the terms of the agreement and is now going back on his word, and know might use lawyers to wangle his way out of it.

[Justloadit]

One important point we tend to forget here - was the financial payout for the restraint of trade fair?

[AndyD]

The restraint of trade isn't there to stifle competition, courts will squash these contracts if they're not fairly written. The OP was compensated accordingly for not opening a competitive business in the local are for a defined period of time. Most of us work long hours to make income, the OP has been paid specifically to not work. Sounds like a reasonable deal to me but more importantly it sounded like a reasonable deal to the OP at the time he signed it.