Restraint of Trade Contract Law Malaysia

In Malaysia, restraint of trade contract law regulates agreements between employers and employees that limit an employee’s ability to work for a competitor or start a competing business for a certain period of time after leaving their current job. Such restrictions are commonly found in employment contracts, but they must comply with Malaysian law to be enforceable.

A restraint of trade clause is intended to protect an employer`s business interests, such as confidential information, trade secrets, customer lists, and other proprietary information. The clause is also intended to prevent the ex-employee from unfairly competing with their former employer.

The rule states that restraints of trade are void as a matter of public policy, unless they are reasonable in the interests of the parties concerned and the public. The courts have the jurisdiction to enforce restraints of trade that are deemed reasonable.

To determine whether a restraint of trade clause is reasonable, the courts will consider the following factors:

1. The nature of the business and the degree of competition.

2. The extent of the restraint.

3. The duration of the restraint.

4. The geographical area of the restraint.

5. The employee`s knowledge and skills.

6. Whether the employee has signed the agreement voluntarily.

7. The public interest.

If the restraint of trade clause is deemed unreasonable, the court will strike it down. However, if the clause is deemed reasonable, the court will enforce it to protect the employer`s interests.

It is important for employers to ensure that restraint of trade clauses in their employment contracts comply with Malaysian law. Employers should seek legal advice to ensure that the clauses are reasonable and necessary to protect their business interests.

In conclusion, the Malaysian restraint of trade contract law aims to balance the interests of employers and employees. The courts will always consider the nature of the business, the extent of the restraint, the duration of the restraint, the geographical area of the restraint, the employee`s knowledge and skills, whether the employee has signed the agreement voluntarily, and the public interest before making a decision. Employers should be aware of these factors when drafting employment contracts with restraint of trade clauses.