Fostering Innovation and Development
Edited by Christopher Arup and William van Caenegem
Chapter 13: Commodifying Sheer Talent: Perverse Developments in the Law’s Enforcement of Restrictive Covenants
Joellen Riley I. INTRODUCTION Earlier chapters in this book have examined ways in which law creates and protects certain intellectual property rights, with a view to proposing law reform that would promote innovation. This chapter shares the concern that law should support (and certainly not suppress) human ingenuity and thereby foster economic growth and development, in the broad interest of public welfare. The focus in this chapter, however, is not traditional ‘intellectual property’ law but the law of contract. More particularly, the concern here is with law relating to restrictive covenants in employment and service contracts. The claim in this chapter is not that the law itself needs to be reformed, but that the practice of law should return to the doctrinal purity of the past. This chapter argues that the law concerning the enforceability of restrictive covenants in employment contracts has slipped into serious error. In Australia at least, the enforcement of restrictive covenants is a matter of private contract law, so disputes are dealt with by the ordinary courts, exercising common law jurisdiction. Restrictive covenants in services and employment contracts are expressly excluded from federal competition laws in Part IV of the Trade Practices Act 1974 (Cth) by s. 51(2). There are only limited opportunities for review of contracts on the basis that they contain ‘unfair terms’ in Australia1 so that, by and large, arguments over the enforcement of restrictive covenants are litigated in the Supreme Courts of the States. It is to those courts that the...
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