Restraint of trade clauses — also called post-employment restrictions or non-compete clauses — are increasingly common in Australian employment contracts, even for relatively junior roles. These clauses can prevent you from working for a competitor, soliciting former clients, or starting a competing business after you leave. Australian courts take a different approach to restraints than many other countries: they start from the position that all restraints are void, and it's up to the employer to prove the restraint is reasonable. But that doesn't mean you can ignore them.
What is a Restraint of Trade?
A restraint of trade clause is a contractual provision that restricts what an employee can do after leaving the employer. In Australia, these typically cover three areas: non-compete (working for a competitor), non-solicitation (approaching former clients or colleagues), and non-dealing (doing business with former clients even if they approach you). Australian law uses a 'cascading' or 'ladder' approach where the contract specifies multiple levels of restriction (e.g., 12 months/6 months/3 months and 50km/25km/10km), and a court will enforce the longest reasonable period and widest reasonable area.
Red flags to watch for
Australian courts rarely enforce restraints beyond 12 months for standard employees. A 24-month restraint suggests the employer is overreaching and may not have tailored the clause reasonably.
Without a cascading clause (multiple time/area options), if the primary restraint is found unreasonable, the entire clause fails. Cascading clauses let courts enforce a shorter, reasonable version.
A geographic restraint covering all of Australia is only likely to be enforced for very senior executives with genuine national client relationships. For most employees, it's excessive.
A non-dealing clause prevents you from working with former clients even if they come to you. This is significantly more restrictive than non-solicitation and harder to justify.
If you're being asked to sign a restraint after starting employment (not as part of the initial contract), the employer should provide additional consideration — a promotion, pay rise, or other benefit.
If the contract defines competitors as any business in your industry, rather than specific named competitors or a defined market segment, the restraint may prevent you from working in your field entirely.
Your legal rights
Under Australian common law, restraint of trade clauses are presumed void unless the employer can demonstrate they go no further than reasonably necessary to protect a legitimate business interest (such as confidential information, trade secrets, or client relationships). The Restraints of Trade Act 1976 (NSW) is particularly significant — it allows courts to read down an unreasonable restraint to make it enforceable, rather than striking it out entirely. Other states rely on common law principles. Key cases include Lindner v Murdock's Garage (1950) and Just Group Ltd v Peck (2016). Courts consider the seniority of the employee, their access to confidential information, the strength of their client relationships, the duration and geographic scope, and whether consideration was provided.
Questions to ask before you sign
- 1Does the restraint include cascading provisions for time and geographic area?
- 2What specific legitimate business interest is the restraint designed to protect?
- 3How do you define 'competitor' — is it a named list or an industry-wide definition?
- 4Does the restraint include a non-dealing clause, or only non-solicitation?
- 5If I'm asked to sign this after starting, what additional consideration will I receive?
- 6Has this restraint been enforced against a previous employee?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.