As the real estate market shifts — whether heating up or cooling down — and the industry starts to evolve, meaning requirements and skill sets of employees also change, it’s not unusual to see movement in the ranks.
By nature, many agents are ambitious and entrepreneurial, and while some are happy to loyally follow an employer for years or even decades, recent times have seen both an influx of new agents and new agencies in many states throughout Australia.
As workplaces change and people come and go, one of the greatest points of confusion for both employees and employers is who owns what information — what exactly an ex-employee has access to and what moves they can make on agency clients as they step out the door.
In the lead up to a much more detailed examination of this area at the EAC Insight roadshow, Lisa Jemmeson, Senior Associate and litigator at JemmesonFisher, helps clarify some of these common questions.
What is restraint of trade?
Though most of us work under contracts and did indeed sign them, many of us view them as ‘fairly standard’ when a new employer hands them over, and as such, few of us read them with the focus and attention-to-detail we should.
With this in mind, while we are aware there may be some limitations as to what we can do in real estate if we leave our current employer, particularly in the local area, the term ‘restraint of trade’ and what it really means can seem a little unclear.
According to Lisa Jemmeson, a restraint of trade in your employment contract applies when you leave a role with your employer, and survives post termination of the employment.
Depending on its nature, the clause protects you don’t use the agency’s confidential information or trade secrets once you have left. Generally, it means you won’t solicit clients or the customer connection of the former employer and try to take them with you.
Furthermore, most agreements have non-acceptance provisions so even if the employee does not solicit the custom of a former client of the former employer, but the customer contacts the former employee directly, the former employee cannot accept the client’s business for a determined period of time.
Restraints of trade also operate so as to prevent a former employee being engaged, employed or concerned with another competing business of the employer in a radius of the employer’s office, ordinarily expressed in a cascading restraint clause.
“As long as the restraint doesn’t go too far, and only seeks to protect the legitimate protectable interest of the business, the employer should be able to enforce the employment contract which includes the restraint of trade when an employee leaves their business,” says Lisa Jemmeson. “What’s very important is the documentation, when the parties enter into an employer agreement, is all prepared correctly.”
“Essentially the employer is trying to protect the good will of their business.”
What is confidential information?
Understanding exactly what constitutes ‘confidential information’ can also be a point of confusion and contention between employer and employee. Lisa points out that what is considered confidential should be defined through the contract between the employee and the agency.
“Secondly, the agency may have policies and procedures which an employee is bound by that outline the nature of confidential information. In order for information to be considered confidential, it must be identified as confidential and have the indicia of confidential information.”
Giving a sales example, Lisa says information on EAC Data or in any public forum, such as the fact a person owns a particular property, is not confidential information. In contrast, that owner’s circumstances, information and notes from a CRM (Client Relationship Management software), or private email addresses or phone numbers might be confidential.
She clarifies that the same can apply to property management, but in that case, third parties like EAC Data may not have the absentee owner’s contact details available.
“If a property manager approaches the owner after leaving the management agency, it may be easy to prove the property manager has downloaded or taken advantage of the employer’s confidential information because it may not be on a data platform.”
Does restraint of trade apply to all agents?
When a traditional employee and employer relationship isn’t in place, the clarity for agencies and agents around restraint of trade and its application seems to weaken further, according to Lisa.
“A contractor is not an employee, they are an independent contractor, a separate business working alongside and parallel to the agency. The real estate agency can still define confidential information and make an independent contractor bound to not misuse confidential information, but they can’t restrain them, for example, from going next door to work.”
“Those types of restraints and non-solicitation and non-acceptance, fall under the employee and employer umbrella and do not apply to an independent contractor.”
Does restraint of trade still confuse you?
As an employer and agency principal, understanding restraint of trade and ensuring your contracts are correctly prepared is very important to your business. Likewise, if you are an employee of an agency, with an intention to leave and work for a competitor or start your own agency, knowing your responsibilities can help you ensure you stay on the right side of the law.
EAC’s 2019 Insight roadshow includes a dedicated session on the topic with solicitor, Greg Jemmeson, and is invaluable for any real estate agent. To reserve your seat in the location nearest to you, visit the Insight booking page.