Restraint of trade has been a big issue within real estate over the last 12 months, with a prominent court case propelled into the spotlight by the media. The EAC wraps up the Toop and Toop v Harris and Hooper case, with some simple insights you can apply in your own business and employment.
If you followed our Insight series this year, you know ‘Toop and Toop’ was hot on the lips of attendees and speakers alike.
If you read the newspaper or industry magazines, you won’t have missed the story of the successful Adelaide agency that sued an ex-employee and her new agency for significant breaches of contract that led to the loss of an estimated $30 million in sales.
What happened in the Toop and Toop case?
According to reports, Arabella Hooper, an REISA-awarded sales person, found herself in hot water, after disciplinary action prompted her to resign from high-profile Adelaide real estate agency, Toop and Toop, in 2015. She commenced work with new employer, Harris Real Estate, the next day.
Hooper was subsequently accused of breaching her contract with Toop by using more than 200 of the agency’s confidential files and hundreds of pages of client information to lure clients to Harris, where she won new business and executed several sales. She also acknowledged she had encouraged another Toop employee to move to new employment at Harris.
Hooper accepted she had breached her contract and Harris settled with Toop Real Estate to the tune of $750,000.
What can we learn from Toop v Hooper and Harris?
As both employers and employees, we can learn a lot from this case that can help us better protect ourselves and ensure we don’t end up in the same situation.
Unfortunately breaches of this nature are not as rare as they could be, and arise sometimes due to a lack of education or understanding, while other times they are deliberate and opportunist.
3 practical tips for staying on the right side of the law
Prepare your contracts properly
Don’t cut corners when it comes to your employment contracts. These documents protect you and they protect your employees. Have your contracts prepared by a professional who knows what they are doing — if you don’t have a solid relationship with a firm already, we suggest our partners, JemesonFisher.
Within the contracts, ensure the definition and nature of confidential information and what can and cannot be done with it is detailed clearly so an employee will have no confusion.
Importantly, make sure the contract is signed! In busy agencies, tasks can get away from us, especially if you have a new employee who comes into the business at an action-packed time.
Have a checklist of everything that needs to happen before the agent starts hitting the pavement under your brand, with signing their contract number one on the list!
Don’t forget also, the restraints on an employee might need to be updated should that employee be promoted or start work in a different part of your agency. For example, moving from admin to sales may require new terms, so ensure a new contract with updated conditions is provided and signed.
Educate new employees about restraint of trade
When you employ a new agent or staff member within your agency, education about their responsibilities should begin straight away. First and foremost, make sure the employee reads their contract in full and understands what is in it.
Don’t simply ask them, ‘everything understood?’. Rather, for important sections, like confidential information and restraint of trade, walk them through it so they know exactly how it applies to common situations that may occur should they decide to move on from your agency in the future.
Secondly, and equally important, if they have come from another agency, in any role, make sure you and they understand any restrictions placed on them by their last employer, and the definition and nature of confidential information as per their last contract.
In the Toop v Harris case, the agency was also made accountable for Hooper’s use of confidential information, not only because it benefited, but reportedly, because it was aware of and encouraged the behaviour that equated to a breach.
Educate your employees post employment
When an employee moves on, it may not always be under the most pleasant of circumstances. Regardless, it is important they are very aware of their responsibilities.
Part of your process for an employee exit should involve revisiting their initial contract with them and ensuring they know what they can and can’t do, as per your agreement, once they leave, and for how long.
This conversation doesn’t need to be difficult if you simply explain you are having it so the employee is protected and doesn’t put themself at risk of a breach.
In educating and protecting them, you are also protecting your agency.
This article does not constitute legal advice.