Amid suggestions from the Federal Government that it might consider introducing proposed laws to restrict the use of restraint of trade clauses in employment contracts, a recent case in South Australia provides a reminder of the way the law deals with such restraints.

In Lochdyl Pty Ltd v Lind (2024), the Court had to determine whether a 2-year post-employment restraint against a hairdressing employee was enforceable.

The restraint prevented the employee from engaging in any activity for a 2-year period after termination of her employment that may cause a customer to go elsewhere for hairdressing services.

The Court assessed whether 2 years was reasonable having regard to the time the business needed to break the connection between the hairdressing employee and the customers of the salon with whom the hairdresser had dealings.

The Court ruled a 2-year restraint was too long. The customers were largely long-standing repeat customers, many of whom booked appointments into the future to secure the availability of a particular hairdresser or service, every 4 to 6 weeks. A customer might be booked in with two different hairdressers on the same visit to the salon to provide different elements of the hairdressing services (e.g. one employee would apply the colour, and another employee would wash and blow dry). Customers might book with any one of the hairdressers in the relatively small group of hairdressers working at the salon if their preferred hairdresser was not working or unavailable on the desired day and time.

A hairdressing employee would usually be able to establish a connection with a new customer, if not on the first appointment, by the second appointment. The repeat customer base was exposed to more than one hairdresser in the usual course and that ordinarily a close connection could be formed by another hairdresser by the second appointment at the latest. Therefore, the business only needed around 3 months ‘breathing space’ to break an outgoing employee’s customer connection and undermine their ability to influence customers to leave.

Therefore, the Court ruled the restraint clause was void and unenforceable against the hairdresser.