Understanding Post-Employment Restraints: A Closer Look at Monarch Advisory Group v Puxty (No 4)

Introduction

Employment contracts often include post-employment restraints designed to protect businesses from losing valuable clients or trade secrets when an employee moves on. However, these clauses must be reasonable to be enforceable. The recent Federal Court of Australia decision in Monarch Advisory Group Pty Ltd v Puxty (No 4) [2025] FCA 534 provides crucial insights into how these restraints are assessed and enforced by Australian courts.

Key Facts of the Case

Monarch Advisory Group Pty Ltd ("Monarch") operated as a financial advisory business specialising in insurance and superannuation products. Brett Puxty and Francis Coggan were senior financial advisors employed by Monarch who subsequently left to establish their own advisory business, Odyssey Advisory Services Pty Ltd ("Odyssey"). Monarch claimed they breached restraint clauses in their employment agreements by soliciting and servicing Monarch’s clients shortly after leaving the firm.

Understanding Post-Employment Restraints: A Closer Look at Monarch Advisory Group v Puxty (No 4)

The Core Issue

The court was required to determine whether the restraint clauses within the employment agreements were valid, enforceable, and, if breached, what damages should be awarded to Monarch.

Determining the Reasonableness of Restraints

The primary legal question involved the enforceability of the restraint clauses under section 4 of the Restraints of Trade Act 1976 (NSW). The court confirmed that restraints must not exceed what is reasonably necessary to protect legitimate business interests, which typically include client relationships and confidential information.

Justice Markovic reaffirmed established principles from leading cases, notably:

• Stacks Taree v Marshall [No.2] [2010] NSWSC 77: Restraints must be necessary for protecting genuine business interests and cannot merely shield an employer from competition.

  
  

• Woolworths Ltd v Olson [2004] NSWCA 372: The enforceability of a restraint is evaluated at the time the contract is entered into, not when the employment ends.

  
  

• OAMPS Insurance Brokers Ltd v Peter Hanna [2010] NSWSC 781: A 12-month restraint period is generally seen as reasonable, allowing businesses sufficient opportunity to secure their client relationships.

  
  

Outcome of Monarch Advisory Group v Puxty

The court held that the restraint clauses were valid and enforceable. It concluded that Monarch had legitimate business interests, particularly in protecting its client relationships and confidential information.

The court determined that a 12-month restraint was appropriate, as this allowed Monarch sufficient time to reinforce relationships with clients following the advisors' departures.

Justice Markovic found that both Puxty and Coggan had breached their restraints by soliciting and servicing Monarch’s clients. As a consequence, the court awarded Monarch significant damages, including compensation for lost profits and loss of opportunity to sell its business at a higher price due to these breaches.

Key Takeaways for Employers and Employees

This decision highlights several important points:

• For Employers: Ensure that restraint clauses are carefully drafted, clearly identifying the business interests being protected. A restraint of up to 12 months is generally acceptable, provided it directly relates to protecting genuine client relationships or confidential information.

  
  

• For Employees: Understand your employment contract's restraint clauses. If you intend to move to a competitor or start your own business, carefully review your obligations to avoid potential litigation.

  
  

Why 1800NOWINNOFEE Can Help

At 1800NOWINNOFEE, we understand the complexities surrounding employment contracts and post-employment restraints. Our expert team offers dedicated advice and representation without upfront costs, ensuring your workplace rights are protected.

If you face a dispute involving a post-employment restraint or any other workplace issue, reach out to us today. We stand ready to assist and advise you clearly and effectively on your legal position.

Call 1800NOWINNOFEE today or visit nowinnofee.help for more information.