Non-Compete Agreement Template: Drafting Tips Under Australian Law

If you’re building a startup or small business, you’re probably investing a lot into your people, your processes, and your know-how. And when you hire a key employee, onboard a contractor, or bring on a senior leader, it’s normal to wonder: what happens if they leave and take your clients, team, or confidential methods with them?

That’s where a non-compete agreement template often comes up. You might have seen downloadable templates online, or you might be thinking about adding a non-compete clause to your employment contract.

In Australia, non-compete terms can be useful - but they’re also one of the most misunderstood (and commonly misused) contract clauses. If the clause is too broad, it may be unenforceable. If it’s too narrow, it may not protect you when you need it most.

Below, we’ll walk you through what a non-compete agreement is, when it can work, what to include if you’re using a non-compete agreement template, and how to protect your business in ways that are more likely to stand up if there’s ever a dispute.

What Is A Non-Compete Agreement (And When Do Businesses Use One)?

A non-compete agreement is a contract (or a clause within a broader contract) that restricts someone from competing with your business for a certain period and within a certain area after their relationship with you ends.

For startups and small businesses, non-compete terms usually come up in situations like:

• Hiring key employees (especially sales, executives, product leads, and anyone with strategic knowledge)
• Engaging contractors who will have access to your customer lists, pricing, or systems
• Business sales, where the seller agrees not to compete with the buyer for a defined period
• Co-founder exits or restructures, where a departing founder could otherwise set up a competing venture immediately

It’s also common to see non-competes bundled with other “restraint” clauses, such as:

• Non-solicitation (they can’t approach your clients or staff to move with them)
• Non-dealing (they can’t do business with your clients even if the client approaches them)
• Confidentiality (they can’t use or disclose your confidential information)

In practice, many businesses get the best protection from a well-drafted confidentiality + non-solicitation package, with a non-compete used only where it’s genuinely necessary.

Are Non-Compete Clauses Enforceable In Australia?

In Australia, non-compete clauses (often called “restraint of trade” clauses) can be enforceable, but only if they are considered reasonable and go no further than necessary to protect your legitimate business interests.

This is the key point many templates miss: a non-compete agreement template isn’t a “one size fits all” solution, and a clause that isn’t tailored to the role and risk is more likely to be challenged.

What Counts As A “Legitimate Business Interest”?

Courts are more likely to support a restraint clause when it protects something real and business-critical, such as:

• Confidential information (trade secrets, pricing, product roadmaps, formulas, internal systems)
• Client relationships and goodwill (especially where the person is the face of your service)
• Workforce stability (protecting against poaching staff and destabilising your team)

On the other hand, a restraint designed mainly to “stop them from leaving” or to reduce competition generally won’t be viewed favourably.

What Makes A Non-Compete Clause “Reasonable”?

Reasonableness usually comes down to whether the restraint is appropriately limited by:

• Time (how long the restraint lasts)
• Geography (where the restraint applies)
• Scope (what type of work/business activities are restricted)

The more senior the person and the more sensitive the information they access, the easier it is to justify a stronger restraint. For a junior employee with limited access, a broad non-compete is much harder to justify.

It’s also important to remember that enforceability can be very fact-specific and can vary depending on the circumstances (and sometimes the jurisdiction and how a clause is drafted). Even a well-worded clause can become hard to enforce if your business circumstances change, the role changes, or the clause doesn’t match the reality of what the person actually did.

What To Include In A Non-Compete Agreement Template (From A Business Owner’s Perspective)

If you’re drafting (or reviewing) a non-compete agreement template, you want to make sure it’s structured to protect your business while still being commercially realistic.

Here are the key components we usually recommend thinking through.

1) Who The Agreement Covers (And When It Starts)

Be clear about:

• Who is restrained (employee, contractor, consultant, director, advisor)
• When the restraint starts (usually when employment/engagement ends)
• What counts as the “end” (resignation, termination, end of a project, expiry of a fixed term)

For employees, you’ll often include the restraint within an Employment Contract rather than as a standalone agreement, so the obligations sit alongside the rest of the employment terms.

2) The “Restricted Business” Definition

This is the part that often makes or breaks enforceability.

A good template defines the restricted business in a way that reflects what you actually do - not “any business that competes in any way.” For example, if your startup sells a specific SaaS tool to a specific market, your restricted business should be tied to that product type and customer segment.

Overly broad definitions can unintentionally block someone’s entire career path - and that’s where enforceability issues tend to arise.

3) Time Periods (Sometimes Using “Cascading” Options)

Some Australian restraint clauses use a cascading approach - for example:

• 12 months, or if that’s not enforceable then 6 months, or if that’s not enforceable then 3 months

Used carefully, this can help present alternative (narrower) options. But it doesn’t guarantee a court will “pick one” or enforce part of the clause - and outcomes can depend on the drafting and the specific facts.

The right period depends on your sales cycle, how long your confidential information remains valuable, and how quickly client relationships can be transitioned.

4) Geographic Limits

If your business is local (for example, a clinic, agency, or brick-and-mortar service), geography matters a lot.

If your business is online, “geography” can be tricky - and this is where generic templates often fall down. A blanket Australia-wide or worldwide restraint might be hard to justify unless there’s a strong reason.

Sometimes, it’s more practical to focus on:

• specific client accounts, or
• specific territories you actively serve, or
• non-solicitation and confidentiality instead of a broad geographic non-compete

5) What The Person Can’t Do (Scope Of Restricted Activities)

A template should clearly say what is prohibited, such as:

• starting a competing business
• working for a competitor in a similar role
• providing competing services to your customers

This is also where you should be precise. For example, restricting someone from working “in any capacity” for a competitor may be too broad if they could take a completely different, non-competitive role.

6) Client And Staff Protections (Often More Effective Than Non-Compete)

For many small businesses, client relationships and staff retention are the real risk - not competition in the abstract.

Consider whether your template should also include (or prioritise):

• Non-solicitation of clients
• Non-dealing with clients
• Non-solicitation of employees

These provisions can be more “targeted” than a non-compete and can be easier to justify as reasonable.

7) Confidentiality And IP Clauses

Even if a non-compete is later challenged, strong confidentiality obligations can still protect your business.

It’s common for a non-compete template to sit within broader contracts that also address:

• what counts as confidential information
• how information must be stored/returned
• ownership of intellectual property created during the engagement

8) Remedies If There’s A Breach

A template should explain what you can do if the restraint is breached. This may include:

• injunctive relief (asking a court to stop the competing behaviour)
• damages (compensation for loss)
• return of confidential materials

In reality, the value of a restraint clause is often that it gives you leverage to act quickly - but only if the clause was drafted in a way that’s defensible.

Common Mistakes With A Non-Compete Agreement Template (And How To Avoid Them)

Templates can be a good starting point, but there are a few classic issues we see when businesses rely on a generic non-compete agreement template without tailoring it.

Using The Same Clause For Every Role

A non-compete for a senior salesperson with deep client relationships should look very different from a non-compete for a junior admin role.

If you use the same clause across the board, you risk ending up with a clause that is unenforceable for everyone - including the people you most need to restrain.

Trying To Restrain “Any Competition”

Broad restraints are tempting (especially when you’re trying to protect a fast-moving startup), but they can backfire.

The more your clause looks like it’s designed to eliminate competition rather than protect a specific business interest, the more likely it is to be challenged.

Not Matching The Clause To The Reality Of Your Business

For example, if your business now serves clients across Australia, but your clause refers only to a local radius, it may not cover your real risk.

Or if your product evolved and the clause still refers to an old business model, you might find it doesn’t bite when you need it.

Forgetting The “Basics” That Actually Protect You Day-To-Day

Sometimes a non-compete becomes the focus, but the day-to-day protections are missing - such as:

• clear confidentiality obligations
• clear IP ownership terms
• strong client terms
• clear termination processes

As a practical matter, good documentation across the business often reduces the need to rely on a restraint later. Depending on what you sell and how you operate, your broader suite might include Website Terms & Conditions and a Privacy Policy too, so your business is protected at every stage (not just when someone leaves).

How A Non-Compete Fits Into Your Wider Startup Legal Setup

For most startups and small businesses, a non-compete should not be a standalone “silver bullet.” It works best as part of a broader legal foundation that reduces the risk of disputes and protects your value.

Use The Right Contract For The Relationship

Start by getting the relationship right on paper. For example:

• Employees: use a tailored Employment Contract with appropriate restraints and policies
• Contractors: use a contractor agreement with confidentiality, IP ownership and (if needed) narrower restraint terms
• Co-founders: use founder documents and equity documents that deal with exits and IP clearly

This matters because restraints often become harder to enforce when the underlying relationship terms are unclear or inconsistent.

Make Sure You’re Also Complying With Employment Law Basics

Restraints tend to be tested when relationships break down. If the exit is messy, or you haven’t followed a fair process, disputes can escalate quickly.

While every situation is different, having clear, consistent employment documentation and processes helps. This can include having the right clauses around duties, confidentiality, and termination (and ensuring they’re applied consistently, not selectively).

Consider How Restraints Interact With Your Other Business Agreements

Some businesses also rely heavily on:

• customer contracts and payment terms
• supplier contracts
• shareholder arrangements
• platform terms and policies

If you’re bringing on investors or co-owners, a Shareholders Agreement can also be a key place where exit rules and protection of business interests are addressed (including what happens if someone starts a competing venture after leaving).

Key Takeaways

• A non-compete agreement template can be a helpful starting point, but in Australia restraints are only enforceable if they’re reasonable and protect legitimate business interests.
• Non-compete clauses work best when they’re tailored to the role, the real competitive risk, and the confidential information the person actually accesses.
• The most enforceable restraints are usually limited by time, geography, and scope - and sometimes drafted with cascading options to try to improve the chances of a narrower restraint being upheld.
• For many startups, confidentiality and non-solicitation provisions can be more practical and defensible than a broad non-compete.
• A restraint clause is strongest when it sits inside a solid legal foundation, including the right employment/contractor agreements and clear IP and confidentiality terms.

If you’d like help putting together a non-compete clause (or reviewing a non-compete agreement template so it actually fits your business), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.