Enforcing Post-Employment Restraints of Trade in Australia: An Employer's Guide

The September 2026 draft reforms

The common-law test

An employment restraint is prima facie void and unenforceable as contrary to public policy. It becomes enforceable only if the employer proves that it is reasonable as between the parties, and that it is not unreasonable in the public interest. That is the framework settled in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd and applied in Australia ever since.

Two requirements do the real work. The covenant must protect a legitimate proprietary or business interest of the employer, and it must go no further than is reasonably necessary to protect that interest. Both are assessed on the facts, ordinarily as at the time the covenant was made — not as at the date of termination, and not by reference to what the employee has since turned out to do. The inquiry looks at the restricted activity, the class of customers or employees covered, the geographic reach, the duration, and the employee's actual role, seniority and access to information and relationships.

Three limits are frequently overlooked. Preventing ordinary competition is not, by itself, a legitimate interest. Employment restraints are scrutinised more strictly than restraints given on the sale of a business, where the purchaser pays for goodwill. And a recital or employee acknowledgement that the restraint is reasonable may be context, but does not conclusively establish reasonableness.

Formation, variation and consideration

Before reasonableness is reached, there is a prior question that defeats more enforcement attempts than any other: which document actually governs, and was the restraint validly agreed?

• Independent advice. There is generally no statutory requirement that an employee obtain independent legal advice before agreeing to an employment restraint. Evidence that advice was obtained or available may be relevant context — particularly for a senior executive negotiating terms — but its absence does not invalidate a covenant, and its presence does not validate an overbroad one.
• Consideration at engagement. Where the restraint is in the contract the employee signs before starting, the employment bargain itself ordinarily supplies consideration.
• Restraints introduced later. A new or materially expanded restraint imposed during employment needs valid contractual implementation — an agreed variation supported by consideration, an effective deed, or a genuinely new contract. Fresh consideration is a contract formation and variation question, not a universal standalone element of the reasonableness test.
• Policies and reissued contracts. Circulating a policy, or emailing an updated contract that is never signed or otherwise accepted, does not necessarily bind the employee to a new covenant.
• Career and corporate events. Promotions, replacement contracts, novations on a transfer of business and restructures all raise the question of which instrument is operative. An employer relying on a superseded agreement, or on a covenant never effectively carried forward, has no covenant to enforce.

The practical step is unglamorous and decisive: locate every candidate document — original and later contracts, deeds, variation letters, incentive plans, share or option documents and policies — and work out which one governs before anything else is considered.

Legitimate interests

The interests Australian courts have accepted as capable of supporting a post-employment restraint are limited:

• Customer or client connection and goodwill — the relationship and influence the employee acquired with the employer's clients, particularly where the employee was the principal point of contact and the relationship is genuinely the employer's asset rather than the employee's personal reputation.
• Confidential information and trade secrets — identifiable confidential material such as pricing structures, margin data, tender strategy, client intelligence or product development information, as distinct from the employee's general skill, experience and know-how.
• Workforce connection — the employer's interest in its relationship with its staff, protected through a properly confined employee non-solicitation covenant directed at solicitation or targeted poaching. This is a narrow basis: it does not entitle an employer to suppress ordinary employee mobility, and an employee later approached by a former colleague acting independently has not been poached. The explanatory materials to the September 2026 exposure draft propose to remove maintaining a stable workforce from the permitted interests.
• Other recognised proprietary interests — only where the interest is one the law recognises and the evidence establishes.

A specialised business method or system is not a free-standing legitimate interest. It is protectable only so far as it amounts to confidential information, a trade secret, goodwill or another recognised proprietary interest — and the employer must be able to identify it.

Types of restraint

Restraint bundles are usually a set of distinct obligations, each assessed separately against the interest it is said to protect:

• Non-compete — restricting the employee from working in, or establishing, a competing business. The widest form of restraint and the hardest to justify.
• Customer or client non-solicitation — restricting approaches to a defined class of clients, usually those the employee dealt with in a defined recent period.
• Employee non-solicitation or non-poaching — restricting approaches to staff, confined to solicitation rather than mere employment.
• Non-dealing or non-acceptance — prohibiting dealing with, or accepting instructions from, restricted clients even absent solicitation. Wider than a non-solicit and requiring stronger justification.
• Confidentiality — an obligation about information, not competition, enforceable on its own terms.
• Intellectual property obligations — ownership and assignment of work product; see our guide to commercial contracts.
• Garden leave — a mechanism operating during employment, discussed below.

Solicitation and dealing

Most restraint disputes turn less on the law than on what the employee is alleged to have done, and whether that conduct falls within the words used.

• Solicitation versus acceptance. Solicitation requires conduct directed at persuading the client to move. Accepting an unsolicited approach from a client who decided independently to follow the employee is ordinarily not solicitation — which is why employers who want to prevent that outcome need a non-dealing covenant, and have to justify it.
• Direct and indirect. Solicitation through a colleague, an intermediary, a family member or the new employer's business development team may fall within a covenant expressed to cover indirect conduct.
• Announcements and advertising. A neutral announcement of a new role, or general advertising, differs in character from a targeted approach to particular clients, though the line depends on content, audience and accompanying conduct.
• Servicing clients who move. Clients may choose their adviser: servicing a client who moved without solicitation may breach a non-dealing covenant but not a non-solicitation covenant.
• Hiring versus soliciting. Employing a former colleague who applied independently is not poaching. A covenant that prohibits employment, rather than solicitation, is wider and needs justification.

This is why the verbs, the defined class and the look-back period matter so much. “Solicit”, “canvass”, “approach”, “deal with” and “accept instructions from” are different prohibitions, and a class defined as “clients the employee personally serviced in the last twelve months” is a different covenant from one covering every client of the group.

Victoria, NSW and elsewhere

Where the dispute is litigated, and which law governs the covenant, can matter more than the drafting.

Victoria and most other jurisdictions. There is no statutory power to modify a restraint. A court either enforces the covenant as it stands, or applies common-law severance. Severance can remove a distinct, severable obligation — the classic “blue pencil” — where doing so leaves the remaining bargain intact and unaltered in character. It cannot be used to rewrite the covenant, to narrow a single composite obligation, or to substitute a reasonable restraint for the unreasonable one the parties actually agreed.

Cascading restraints. A cascade offers a matrix of alternative periods and areas with a severance mechanism, in the hope the widest combinations can be struck out and a narrower one survive. Whether that works depends on the drafting, the governing law and the forum. In Just Group Ltd v Peck [2016] VSCA 334 the Victorian Court of Appeal dismissed an employer's appeal concerning a cascading restraint that went further than was reasonably necessary. A cascade is a drafting device, not a guarantee: a court is not obliged to select a palatable option from a menu the employer constructed. The September 2026 exposure draft would prohibit cascading terms outright for national system employees.

New South Wales. The Restraints of Trade Act 1976 (NSW) changes the position materially: a restraint is valid to the extent that it is not against public policy, and the court has a statutory discretion, in defined circumstances, to read the restraint down rather than strike it out. That makes NSW more forgiving of imperfect drafting.

Choice of law and forum. A clause nominating NSW law and NSW courts is relevant but neither conclusive nor a universal cure. Whether the chosen law governs the restraint, whether the chosen court is the appropriate forum, and how employment performed in another state is treated are conflict-of-laws questions turning on the circumstances. Cross-border employment needs specific advice rather than a clause chosen for its postcode.

Duration, geography and activity

There is no universally enforceable duration and no standard distance. Any period or radius has to be justified by evidence, and the useful questions are these:

• How long does the employer realistically need to protect the client relationship — for example, across a renewal or replacement cycle — before the connection with the departing employee ceases to give an unfair advantage?
• What is the useful life of the confidential information? Pricing that changes quarterly does not justify the period that a long-term development programme might.
• How much influence did this employee actually have over clients or staff, and does any geographic limit correspond to the competitive market? Where services are delivered remotely, a radius may protect nothing and restrict a great deal.
• Is the restricted activity confined to the part of the business the employee was engaged in, and would a narrower covenant — a non-solicit rather than a non-compete, a shorter period, a defined client list — have protected the interest adequately? If so, the wider covenant is vulnerable.

Garden leave

Garden leave is frequently misunderstood as an automatic extension of the restraint period. It is not.

• Garden leave operates during employment. The employee remains employed, ordinarily must continue to be paid in accordance with the contract, and remains subject to the duties of employment.
• The contract determines when the post-employment restraint starts to run — usually from the termination of employment, which means garden leave may in practical terms precede rather than extend it.
• Some contracts expressly credit garden leave against the restraint period or provide an offset; others do not. The answer is in the document.
• The cumulative period out of the market is relevant to reasonableness and to the court's discretion: a long garden leave followed by a long restraint may be harder, not easier, to defend.
• Directing garden leave without contractual authority, or withholding remuneration the contract does not permit, can expose the employer to a breach or repudiation argument that undermines the restraint itself.

Confidential information

Confidentiality obligations do not survive “indefinitely” as a matter of course. They survive to the extent that the contract and the general law support them, and — for equitable protection — while the information retains its confidential character. Several distinct sources of obligation are in play:

• Express contractual confidentiality — enforceable on its terms, subject to construction and to the restraint doctrine where a confidentiality clause is so broad that it operates as a restraint on working at all.
• The equitable obligation of confidence — protecting information that has the necessary quality of confidence, was imparted in circumstances importing an obligation, and is used or threatened to be used without authority.
• Trade secrets — the strongest category, and the most demanding to establish.
• Commercially sensitive information with a shelf life — pricing, pipeline and tender material that ceases to be confidential as it ages or is superseded.
• Public information — not confidential, whatever the contract says.
• The employee's general skill, experience and know-how — the employee's own, and not protectable.
• Statutory duties — section 183 of the Corporations Act 2001 (Cth) prohibits a director, other officer or employee of a corporation from improperly using information obtained because of their position to gain an advantage or cause detriment to the corporation, and applies to former officers and employees. Where it is engaged it can be a useful additional cause of action.

In litigation, generalities fail: the information has to be identified with enough precision for the court to know what it is protecting and for the respondent to know what they must not use. The practical protections are unremarkable — classify what is genuinely confidential, limit access, keep access and export logs, and require return or destruction on exit.

Employer breach and repudiation

Enforcement is not a one-way inquiry into the employee's conduct. An employer's own performance of the contract is frequently decisive, and this is the issue most often missed before a demand is sent. Enforcement may be affected — and in some cases defeated — where the employer:

• repudiated the employment contract;
• terminated the employment wrongfully;
• failed to pay contractual entitlements, including notice, commission, bonus or incentive amounts;
• purports to rely on a restraint in a superseded agreement, or on a covenant never validly implemented; or
• seeks discretionary equitable relief without having performed its own obligations.

How the employment ended matters. A resignation, a summary dismissal for serious misconduct, a redundancy and a termination without cause on payment in lieu can produce different consequences depending on the contract and the law — see our articles on serious misconduct and termination and genuine redundancy and consultation.

No employer default automatically destroys every restraint. The outcome depends on the contract wording, any severability or survival provision, whether a repudiation was accepted rather than affirmed, the seriousness of the default and the relief sought. But the analysis belongs at the start, with the payroll and termination records in front of you.

Evidence preservation

Restraint cases are won and lost on contemporaneous records, and the window to secure them is short. On employer-owned systems, act immediately:

1. Suspend deletion and retention cycles on the employee's mailbox, message archives and file shares, and issue a documented litigation hold or preservation direction.
2. Preserve CRM records, including export, report and download activity, together with system and building access logs and file-transfer, cloud-sync and printing activity.
3. Quarantine company devices and arrange forensic imaging by a qualified practitioner, with a documented chain of custody, before the device is wiped, reissued or repurposed.
4. Record what was accessible to the employee and when — access rights matter as much as activity.
5. Preserve adverse as well as helpful material, and manage privilege deliberately: selective preservation damages credibility, and labelling a document “privileged” does not make it so.

There is a firm boundary between preserving the employer's own systems and reaching into material that is not the employer's. Personal devices, personal cloud accounts and private communications should not be accessed without lawful authority — consent, discovery, a subpoena or a court order. Surveillance, privacy, employment and computer-access laws all apply, and employers should not ask clients or staff to obtain evidence by means the employer could not lawfully use itself. Evidence gathered unlawfully can be excluded, can expose the business to separate liability, and can convert a strong case into a defensive one.

Pre-action sequence

A disciplined sequence avoids most of the expensive mistakes:

1. Locate every potentially operative contract, deed, variation, incentive document and policy, and identify which governs.
2. Identify the governing law, the appropriate court and any jurisdiction clause.
3. Decide which covenant is actually relied upon, and read it as a court would — verb by verb, class by class, period by period.
4. Articulate the legitimate interest threatened, and the evidence that establishes it.
5. Investigate the alleged conduct lawfully, and preserve what you find.
6. Confirm the employer's own compliance: entitlements paid, termination effected in accordance with the contract, no unaccepted repudiation.
7. Assess urgency, likely loss and the real commercial value of the outcome sought.
8. Where justified, send a carefully framed letter — a request for information, a preservation notice or a cease-and-desist — and seek undertakings or operational safeguards such as client or information quarantines.
9. Consider mediation or a negotiated narrowing of the restraint, which often produces a better result than an all-or-nothing hearing, and prepare an interlocutory application only if the exposure and cost are proportionate.

Cease-and-desist correspondence is neither automatic nor risk-free. An overstated letter can hand the other side a defence, prompt a pre-emptive application, or create client consequences the employer had not weighed. Draft it on the assumption it will be exhibited to an affidavit.

The new employer

Putting the new employer on notice is a tactical step, not a finding of liability.

• Notice alone establishes nothing. It may, however, be relevant to knowledge if a claim for inducing breach is later brought.
• Inducing breach of contract requires the applicable elements to be proved, including knowledge of the contract and the relevant obligation, an intention to procure its breach, and causation. Detailed analysis of the economic torts is beyond this guide's scope.
• Many disputes resolve because the new employer will restructure duties, quarantine identified clients or information, defer a start date or give undertakings — usually a better commercial outcome than litigation.
• Correspondence must be measured. Allegations sent to a competitor or to clients can generate claims in defamation, misleading conduct or interference with business relations.
• Joining the new employer to proceedings enlarges the dispute, funds the other side's defence, and can turn a narrow restraint claim into industry-wide litigation.

Interlocutory injunctions

Restraint cases are usually decided, in practical terms, at the interlocutory stage: by the time a final hearing arrives the restraint period has often expired.

An applicant must show a serious question to be tried, or a sufficient likelihood of success to justify the relief sought, and that the balance of convenience favours an injunction. Australian authority treats these as related elements of a single discretionary assessment rather than separate hurdles cleared in sequence, and the adequacy of damages is an important consideration within that assessment rather than an isolated formula. Beyond that:

• Urgency and delay. Delay between learning of the conduct and applying tells against the applicant, particularly where the relief sought is to preserve a position the applicant has allowed to erode.
• Status quo. The court is generally concerned to hold the position pending trial, not to grant the applicant its final relief in advance.
• The undertaking as to damages, and security. The applicant must undertake to compensate loss caused if the injunction is later held to have been wrongly granted, and may be required to provide security. Restraining a person from earning income creates real exposure.
• The respondent's prejudice. The effect on the employee's livelihood, and on the new employer and its clients, is weighed directly.
• Expedition. Where the restraint is short, an expedited final hearing — or interim undertakings pending it — is often better and cheaper than a contested interlocutory fight.
• Clean hands and candour. On an urgent or without-notice application there is a duty of full and frank disclosure; failing to disclose an unpaid entitlement or a superseded contract can cost the injunction and its costs.
• Narrower relief and costs. Courts frequently grant relief narrower than the covenant — confined to identified clients, to non-solicitation, or to a shorter period — and an unsuccessful urgent application can produce an early adverse costs order.

For the general principles, procedure and evidence required in Victoria, see our detailed guide to urgent injunctions in Victoria.

Search, freezing and springboard relief

Three collateral remedies come up in restraint disputes and are routinely overestimated:

• Search orders are exceptional. They are not a convenient way to gather evidence, and are confined to cases meeting demanding requirements — see search orders in Victoria.
• Freezing orders preserve assets against the risk of dissipation so that a judgment is not rendered hollow. They do not determine, or advance, the restraint claim itself — see freezing orders in Victoria.
• Springboard relief addresses an unfair competitive head start obtained through misuse of confidential information, and is directed at removing that advantage for as long as it persists. It is not automatic, and it requires the misuse and the resulting advantage to be identified and proved.

Forum, claims and remedies

Restraint enforcement happens in courts exercising contractual and equitable jurisdiction, not in the Fair Work Commission, which deals with matters such as unfair dismissal and general protections applications. Which court is appropriate depends on the jurisdiction, the relief sought, the parties and the causes of action, and there is no single universal answer.

Depending on the facts, claims may include breach of contract, breach of the equitable obligation of confidence, breach of statutory duties such as section 183 of the Corporations Act, or inducing breach of contract against a third party. Remedies may include declarations, injunctions, damages or equitable compensation, delivery up or destruction of material and, in some cases, an account of profits. Not every remedy is available for every cause of action, and the choice shapes the evidence required. Costs and the exposure created by the undertaking as to damages belong in the decision before the first letter is sent.

Public interest and proportionality

Enforceability is not purely a private contractual question. The doctrine exists because restraints engage the public interest, and a court weighs employee mobility, competition, customer choice, the availability of skills and the protection of genuine goodwill and confidential information. The September 2026 exposure draft forms part of that changing policy context, and an employer taking enforcement decisions now should understand which way the policy setting is moving when deciding whether a broad covenant is worth relying on.

Employer decision framework

Before committing to enforcement, work through these questions in order. A weak answer to any of the first four usually ends the inquiry.

Worked examples

The following examples are hypothetical and are included to show how the competing questions arise. They are not predictions of outcome.

1. The senior professional and their own clients. A senior adviser resigns and six clients they personally managed follow within weeks; two say they were telephoned. The covenant is a twelve-month non-solicit confined to clients serviced in the last year. The live questions are whether the approaches were solicitation or client-initiated, whether the relationships were the firm's goodwill or the adviser's personal following, whether twelve months is justified by the engagement cycle, and what the clients will say in evidence.

2. The technical employee and the source material. Export logs show a large download to a personal drive three days before resignation. The questions are whether the material is genuinely confidential rather than know-how or public information, whether it has been used or only taken, whether preservation and imaging were lawful and documented, whether springboard relief is apt, and whether the non-compete adds anything the confidentiality covenant does not.

3. The employee who simply competes. A mid-level employee joins a competitor, contacts no clients, takes nothing, and does comparable work. The employer holds a broad non-compete. The questions are what legitimate interest is actually threatened, whether anything beyond ordinary competition is in play, and whether the covenant is enforceable at all — the fact of competition, without more, is unlikely to be enough.

4. The restraint added mid-employment. On promotion, the employee was emailed a new contract with a much wider restraint; it was never signed. The questions are whether the covenant was ever agreed, whether conduct amounted to acceptance, and whether the earlier, narrower contract remains operative.

5. The garden-leave offset. The employee was directed onto three months' paid garden leave under a contract containing a six-month non-compete with no offset. The questions are whether the direction was contractually authorised, when the restraint began to run on the contract's own words, and whether nine cumulative months out of the market is reasonable.

Related reading

• Urgent injunctions in Victoria — the principles, evidence and procedure for interlocutory relief.
• Search orders in Victoria — when the exceptional requirements for a search order can be met.
• Freezing orders in Victoria — preserving assets pending judgment.
• Serious misconduct and termination — how the manner of dismissal affects later enforcement.
• Genuine redundancy and consultation — redundancy process risk for employers.
• General protections and adverse action — the claim a restraint dispute is often met with.
• Unfair dismissal claims — the separate Fair Work Commission jurisdiction.
• Employee or contractor — classification, which determines which regime applies.
• Commercial contracts — drafting, variation and interpretation fundamentals.
• Representations, warranties and indemnities — contractual protections beyond restraints.

Frequently asked questions

Official sources

• Treasury Ministers, “Opening the door to better and higher paying jobs: banning unfair non-competes” (7 September 2026)
• Treasury consultation hub — exposure draft, Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 (submissions close 2 October 2026)
• Exposure draft explanatory materials, Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 (Treasury)
• Fair Work Commission — high income threshold
• Restraints of Trade Act 1976 (NSW)
• Corporations Act 2001 (Cth) — including section 183
• Just Group Ltd v Peck [2016] VSCA 334
• Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57

How Parke Lawyers can help

Parke Lawyers' Employment Law for Employers team advises Australian businesses on restraint drafting and implementation, on assessing whether a departure is worth acting on, on lawful evidence preservation and investigation, on correspondence and undertakings, and on urgent injunctive and springboard relief where a breach is threatened or has occurred.

Engaging us early is usually decisive. Device and system evidence is easiest to preserve in the first days, undertakings are easiest to obtain before positions harden, and the decision not to litigate is far cheaper than the decision to stop.