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

The Common-Law Framework: Prima Facie Void, Enforceable if Reasonable

At common law every post-employment restraint of trade is prima facie void as an unreasonable restraint on trade and contrary to public policy. The employer can enforce the restraint only by proving that it goes no further than is reasonably necessary to protect a legitimate business interest of the employer. That is the doctrine settled in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company and applied consistently in Australian authority ever since (including Just Group v Peck, Wool Combers v Fifth Round Investments and many more recent cases).

Legitimate Business Interests

The recognised categories are:

• Customer connection — the goodwill built up between the employee and the employer's customers or clients, especially where the employee was the primary point of contact;
• Confidential information and trade secrets — genuine confidential business information (pricing models, methodologies, customer intelligence, product plans) that is not merely the employee's general skill and knowledge;
• Workforce stability — the employer's interest in preventing systematic poaching of remaining staff, particularly where teams work together on projects; and
• In some cases, the employer's interest in a specialised or proprietary business methodology.

An employer that cannot articulate a specific legitimate business interest — with evidence — will struggle to enforce any restraint, no matter how the clause is drafted.

The Reasonableness Test

Reasonableness is assessed as at the date the restraint was entered into, not at the date of termination. That is an important point: a broadly-drafted restraint imposed at recruitment years ago, without fresh consideration and without independent advice, may not be enforceable against a senior employee whose role and remuneration have since grown. The Court weighs:

• the seniority, function and access to information of the employee;
• the industry and its geographic footprint;
• the scope of the restraint — activity, geographic area and duration;
• whether the employee received independent legal advice;
• whether fresh consideration was paid at the time the restraint was imposed or renewed;
• the surrounding contractual and industrial context; and
• whether the restraint sensibly maps to a defined legitimate business interest.

The Three Common Restraint Clauses

A modern employer restraint bundle usually contains three linked clauses:

• a non-compete — restricting the employee from working for, or setting up, a competing business for a defined period;
• a non-solicitation and non-poaching clause — restricting the employee from soliciting the employer's customers, and from soliciting or hiring the employer's staff; and
• a confidentiality and IP clause — protecting confidential information indefinitely and vesting intellectual property in the employer.

Each clause is assessed separately against the interest it is said to protect and the burden it imposes on the departing employee.

Cascading Clauses and Severance

A cascading restraint clause offers the Court a menu of combinations of duration and geographic area coupled with a severance provision, so that wider options can be struck down while narrower options may remain. Whether a cascading clause operates as intended depends on the precise drafting, the effectiveness of the severance mechanism, the governing law of the contract and the jurisdiction in which enforcement is sought.

In New South Wales the Restraints of Trade Act 1976 (NSW) permits the Court to read down an unreasonable restraint to its reasonable extent. The common-law approach in other jurisdictions differs and must be assessed for the particular clause; a cascading structure that works in one jurisdiction may not have the same effect elsewhere.

Duration

There is no universally enforceable duration for a post-employment restraint. Duration is one of the reasonableness factors and is judged on the evidence in each case. Relevant considerations include the nature and value of the legitimate business interest to be protected, the seniority and function of the employee, the industry context, and the period over which any customer connection or confidential information may reasonably retain its protective value. Duration should be tied to the interest to be protected and to the evidence available — not to a template period.

Timing, Evidence and Interlocutory Relief

Where an employer intends to seek interlocutory relief, delay between becoming aware of the alleged breach and applying for relief may be weighed against the applicant in the exercise of the Court's discretion. Prompt preservation of evidence and prompt legal advice may therefore be important. Where the facts warrant it, an employer may consider steps such as:

1. securing the employee's company devices and email accounts;
2. arranging independent forensic imaging of relevant devices to preserve chain-of-custody;
3. preserving email and messaging logs and any customer-relationship-management records;
4. identifying affected customers and — carefully — obtaining evidence of any approaches or solicitation;
5. sending appropriately worded cease-and-desist correspondence to the departing employee and, where appropriate, to the new employer;
6. obtaining employment advice and preparing an interlocutory application if the alleged breach continues.

Interlocutory Injunctions

An interlocutory injunction requires the applicant to show (1) a serious question to be tried on the underlying restraint claim; (2) that the balance of convenience favours the injunction; and (3) that damages would not be an adequate remedy. The applicant is usually required to give an undertaking as to damages — a promise that if the injunction is later found to have been wrongly granted, the applicant will compensate the party restrained. Each of these matters is subject to the Court's discretion and depends on the evidence. For a fuller treatment see our companion articles on urgent injunctions in Victoria and search orders in Victoria.

Garden Leave

A garden-leave clause allows the employer to require the departing employee to serve out their notice period at home, on full pay, not working. It effectively extends the period during which the employee has no customer contact — and postpones the effective running of any post-employment restraint until the garden leave ends. Well-drafted contracts pair garden leave with a short, targeted post-employment non-compete rather than relying on a long standalone restraint.

Confidential Information After Termination

Confidentiality obligations survive termination indefinitely at common law and under any properly drafted contract, but only for information that is genuinely confidential. The employer should:

• identify and label categories of confidential information during the employment;
• restrict access on a need-to-know basis;
• use system controls (access logs, data-loss prevention, restricted downloads);
• require return or destruction of all confidential material on termination; and
• seek prompt injunctive relief where evidence of use or disclosure emerges.

Non-Compete Reform

The Australian Government announced in the 2025–26 Budget proposed reforms concerning post-employment non-compete clauses for low- and middle-income workers and certain wage-fixing and no-poach arrangements. Treasury has said the reforms are intended for 2027, subject to further consultation and the passage of legislation. No enacted ban, final income threshold or fixed commencement date applied at the date of this article, and the current common-law reasonableness test continued to apply. Employers should monitor the reform process and keep restraint drafting under review as it progresses.

Working With the New Employer

Where there is credible evidence of breach, the employer may put the departing employee's new employer on notice of the restraint. New employers may prefer not to be joined to proceedings or exposed to a claim in tort for inducing breach of contract. Appropriately worded correspondence may facilitate a practical outcome without the need for litigation, though whether it does so depends on the facts.

Interaction With Other Employment Claims

Restraint enforcement frequently overlaps with other employment issues — misconduct allegations, capacity questions, redundancy events and general protections complaints. For example, a departing employee who claims constructive dismissal may argue that the restraint is unenforceable because the employer repudiated the contract first. See our related articles on serious misconduct and termination, genuine redundancy and general protections claims.

Drafting Considerations

A considered restraint bundle is typically drafted to include:

• a non-compete scoped to a defined market, activity and interest;
• a non-solicit and non-poach limited to customers the employee actually dealt with in a defined recent period of the engagement;
• confidentiality and IP clauses;
• a garden-leave clause, where appropriate;
• an express acknowledgement of the legitimate business interests being protected;
• where the employee is senior, fresh consideration at the time of imposition and evidence of independent legal advice; and
• cascading options with a severance clause, drafted with regard to the governing law and jurisdiction.

Common Employer Mistakes

Common mistakes include: relying on a long-outdated employment contract without review; drafting a restraint that is broader than any identifiable legitimate business interest; failing to identify or evidence the interest to be protected; failing to preserve device and communications evidence; and pursuing enforcement without the evidence base to support the relief sought.

Frequently Asked Questions

How Parke Lawyers Can Help

Parke Lawyers' Employment Law for Employers team acts for Australian employers on the drafting, review and enforcement of post-employment restraints, confidentiality obligations and intellectual property protection, together with urgent injunctive and springboard relief where a breach is threatened or has occurred. Engage us early so evidence can be preserved and any correspondence or urgent relief considered promptly.