Restraint of trade clauses in Australian employment contracts and NDAs are common — but they are only enforceable if they go no further than reasonably necessary to protect a legitimate business interest. Courts regularly strike down or reduce over-broad restraints, but you still face the cost and stress of litigation if an employer tries to enforce one. Understanding the clause before you sign is always better than fighting it after you have already left.
What is a Restraint of Trade?
A restraint of trade clause is a post-employment restriction that limits your ability to work for competitors, solicit clients or colleagues, or use confidential information after your employment ends. Australian courts apply a reasonableness test: the restraint must protect a legitimate interest (such as confidential information or client relationships) and must be no wider than necessary in geography, time, and activity. Many employment contracts include cascading restraints — multiple clauses of decreasing width — so courts can enforce the narrowest one that is reasonable.
Red flags to watch for
Australian courts will strike down restraints that are wider than necessary. A national, long-duration restraint for a role without access to confidential information or client relationships is highly unlikely to be enforced.
Without cascading clauses, an over-broad restraint may be struck down entirely rather than read down. Cascading restraints are the standard practice in Australian employment law.
A blanket employee non-solicitation clause covering thousands of staff is likely wider than necessary and more difficult to enforce.
In some states (particularly NSW), a court may read down an otherwise valid restraint if the employee has already served garden leave, as the legitimate interest may already be protected.
Your general skill and experience cannot be made confidential by a contract. Only genuine trade secrets and specific business information warrant protection.
Your legal rights
Australia does not have a single national restraint of trade law — rules differ by state. NSW has the Restraints of Trade Act 1976, which gives courts a specific power to read down unreasonable restraints to the extent they are reasonable. Other states rely on common law. In all states, the starting presumption is that restraints are void as contrary to public policy, and the burden is on the employer to prove the restraint is reasonable. If you breach a restraint, an employer can seek an injunction (to stop you working) or damages (if they can prove loss).
Questions to ask before you sign
- 1What specific business interests is this restraint designed to protect?
- 2Is the geographic and time scope proportionate to my actual role and client exposure?
- 3Is there a cascading restraint structure?
- 4Am I required to serve garden leave, and how does that interact with the restraint?
- 5What specific activities are restricted — working for competitors, soliciting clients, or both?
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.