Protecting The Goodwill Of Your Business

You may not have given much thought to goodwill but it’s essential to be aware of this concept for the safety and future of your business. We set out a guide for you to consider to ensure the goodwill of your business is maximised and you avoid unexpected issues.

Have you protected your IP?

In order to ensure you’re focusing on protecting the rights of your business, make sure you have registered all intellectual property rights you may have in relation to your business. For example, you may be using a catchy slogan. Have you tried to register a trade mark over the slogan, or your logo? If you do not do this a third party might spot a commercial opportunity to attempt to use what is rightfully yours.

Establish your key employees and secure their commitment

Key employees are vital assets that keep the wheels of your business turning. Since they are such an integral influence in the business operation, it is important to make sure they are committed to you legally for as long as possible. This can be achieved by fixed term contracts with the key employees, to avoid an unwanted situation that may arise when things go south. Your employees are a major force in driving your business and possibly have many influential relationships established with your clients. It is crucial to make sure these clients stay with your business and are not taken by your former employees once they leave the business and go elsewhere.

Restraint of Trade

​A Restraint of Trade is the common form of protection that may be used to protect your goodwill. This can legally protect your business from unwanted competition that arises when your employees leave your business to set up elsewhere. However they can only be used in limited situations. In general terms you cannot stop an employee from earning a livelihood after they leave you, unless it is for a limited period and only then will it be enforceable in limited circumstances.

Validity of Restraint of Trade
A restraint of trade is only valid and enforceable when it is reasonable. If a court finds the restraint unreasonable, you may find that the restraint of trade will not be enforceable. Therefore for the restraint to be valid it must be reasonable in both:

The interests of the parties involved; and

The interests of the public.

Social Media
This major point is often overlooked. You can have your employees sign all the relevant documents, but what are they saying about your business to their friends? You need to ensure that you keep a close observation on social media to see if you can find anything about the employee’s comments about you or your business. This may not be so easy to do due to privacy issues but at the very least you need to do all the basic online searching to see if anything negative, or worse, defamatory, comes up. In today’s society where businesses can fall overnight with the power of the internet, it is more crucial than ever to ensure your business is not receiving any negative publicity that may be able to be avoided by addressing it when you engage the employee.

Frequently Asked Questions about protecting Goodwill

Q : Can I impose any restraint of trade on a key employee?

A : No, any restraint must pass a test of reasonableness and be in the interests of the parties involved as well as the interests of the public.

Q : What can I do if an employee makes derogatory comments about me personally on Facebook?

A :  You can consider defamation and possible dismissal of the employee

Q :  What IP protection should I consider?

A : Depending on the nature of your business the steps would include registering a patent, a trade mark or taking steps to protect copyright

How can E Berman & Co Solicitors help me?

E Berman & Co Solicitors is a Chatswood law firm that has been providing quality legal services to the public since 1984. Contact our office at 9412 2493 – we’re more than happy to have a quick chat! You can also visit us on our website for more information.

Contact Errol on 9412 2493
E-mail: errrol@ebandco.com.au