Concerned About Competition From A Former Employee, Contractor Or Service Provider? A Non-Compete Agreement May Be The Solution (2025 Updated)

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Industry-specific knowledge and your relationships with clients are often some of the most valuable assets for your business in 2025. Keeping these assets secure is more important than ever in today’s rapidly evolving market.

So what happens to your business’s confidential information, trade secrets and client relationships when your contractual relationship with an employee, contractor or third party comes to an end?

A Non-Compete Agreement is a specialised contract designed to protect your business from competition by restricting individuals or companies – such as former employees, contractors, business partners, franchisees and manufacturers – from utilising sensitive information to gain a competitive edge.

What Is A Non-Compete Agreement?

Typically, a Non-Compete Agreement is established between your business and any party that has been privy to your confidential information. It is an essential tool to safeguard your intellectual capital and market insights.

The third party may be anyone with whom you have, or previously had, a contractual relationship – including employees (see our Employment Contract guidelines), contractors (Contractor Agreement advice), business partners, franchisees or manufacturers.

Confidential information encompasses data and insights that could be used to compete with your business – ranging from intellectual property and market research to detailed client lists, trade secrets and strategic business practices.

What Is Covered In The Agreement?

A comprehensive Non-Compete Agreement will typically include clauses relating to one or more of the following:

Geographical restrictions: Limits the area in which the restricted party can operate within the same industry or field.

Time restrictions: Specifies a fixed duration for the clause, preventing competition for a set period – often 12 months, with alternative terms (e.g. 6 months) if the primary duration is deemed excessive.

Activity or services restrictions: Clearly defines the specific business activities or services that the restricted party is prohibited from undertaking, ensuring the clause is appropriately tailored.

Non-solicitation clause: Protects your existing business relationships by preventing the restricted party from contacting your clients or recruiting your staff. This is critical for maintaining your competitive advantage.

Often, these clauses are embedded within broader contracts such as an Employment Agreement or a Contractor Agreement. For further insight on combining protective provisions effectively, refer to our guidance on Contract Review and Redrafting.

Are There Any Issues With Enforceability Of Non-Compete Agreements?

Because Non-Compete Agreements can restrict an individual’s ability to pursue new opportunities, their enforceability is often a subject of legal scrutiny. In 2025, courts continue to examine these clauses to ensure they strike a fair balance between protecting a business’s legitimate interests and not unduly impeding a person’s right to earn a living.

If a dispute arises, the court evaluates whether the restrictions are reasonable, narrowly tailored, and necessary to protect genuine business interests. It is vital that any such clause is specific and aligned with the unique needs of your industry.

For example, if the geographical scope is overly broad, the duration excessively long, or the activities described too vague, a court may refuse to enforce the clause in full or modify it to retain only the reasonable elements.

Court decisions have shown that striking out overreaching provisions while upholding the enforceable segments is a common outcome, thereby preserving the overall intent of the agreement.

To adapt to potential enforceability challenges, many agreements now incorporate cascading clauses. For instance, a clause might state, “the restraint period is 12 months, or if that term is held invalid, then 6 months.” This approach offers flexibility and ensures your agreement remains effective under 2025’s legal standards.

With the evolving nature of employment and business structures in 2025, it is wise to review and update your Non-Compete Agreements regularly. Advances in technology and shifting market dynamics may necessitate adjustments to ensure the restrictions remain both fair and enforceable. Our Non-Compete Agreement guide provides up-to-date insights on best practices.

Overall, Non-Compete Agreements are a valuable mechanism for protecting your business’s competitive edge by safeguarding sensitive information. However, due to their inherent complexity, it is crucial to ensure that the clauses are carefully drafted to balance protection with fairness.

Need Help?

We recommend seeking expert legal advice on Non-Compete Agreements to ensure that your clauses are enforceable and precisely tailored to protect your confidential business information. With the regulatory landscape continuously evolving in 2025, professional guidance is indispensable.

If you need assistance drafting or revising a Non-Compete Agreement, we’re here to help with clear, practical legal solutions. For further insights on related contractual protections, explore our resources on Non-Disclosure Agreements and Employment Contracts.

You can reach us on 1800 730 617 or team@sprintlaw.com.au for a free consultation and tailored legal advice. Our team of experienced business lawyers is ready to support you with the latest legal solutions for your business needs in 2025.

Embeth Sadie

Embeth is a senior lawyer at Sprintlaw. Having previously practised at a commercial litigation firm, Embeth has a deep understanding of commercial law and how to identify the legal needs of businesses.