Non-Compete Clause Example In Australia: Make Restraints Stick

Hiring and training great people takes time. When a key team member leaves, you want to make sure they don’t walk straight into a competitor and take your hard-won customers, confidential information or business strategies with them.

That’s where a non-compete clause comes in. Used well, it can protect your business during that vulnerable transition. Used poorly, it can be unenforceable or even backfire.

In this guide, we walk through how non-compete clauses work in Australia, share a clear non-compete clause example you can adapt with legal help, and outline practical tips to improve enforceability from the start.

What Is A Non-Compete Clause?

A non-compete clause (also called a restraint of trade) is a contract term that restricts a former employee, contractor or founder from competing with your business for a set time, in a defined geographic area, and in relation to specific activities.

It’s usually paired with related restraints, such as non-solicitation (not poaching clients or staff) and non-dealing (not doing business with your clients even if they approach first), plus strict confidentiality obligations.

Most employers include restraints in the employee’s Employment Contract, or in some cases as a standalone Non-Compete Agreement for senior hires or key contractors.

Are Non-Compete Clauses Enforceable In Australia?

Yes - but only if they go no further than reasonably necessary to protect your “legitimate business interests.” Courts don’t enforce restraints that are simply about eliminating competition. You need a genuine interest worth protecting, such as:

• Confidential information and trade secrets.
• Substantial client connections or goodwill.
• Stability of your workforce (preventing staff poaching).

Reasonableness is judged case by case. Key factors include:

1) Scope of Activities

Restrain the person only from the competitive activities they actually performed or had access to, not your entire industry. A “whole-of-industry” ban is more likely to be struck down.

2) Geographic Area

Define the area realistically tied to your market. If your customers are in Sydney, a restraint covering all of Australia (or beyond) may be excessive unless you truly operate nationally.

3) Duration

Shorter is safer. Six months to 12 months is a common range for senior roles with strong client ties. Longer terms may be justified in rare cases, but you’ll need a good reason.

4) Seniority And Access

Restraints for executives and senior salespeople are more likely to hold than for junior staff with limited access to sensitive information.

Because these assessments are nuanced, it’s smart to get tailored Restraint of Trade Advice before relying on a clause to protect a critical part of your business.

What Does A Good Non-Compete Look Like? (With Example)

Australian contracts often use “cascading” or “step-down” restraints. This means the clause lists several combinations of time periods and areas. If a court finds the broadest combination too wide, it can still enforce a narrower option without rewriting your agreement.

Non-Compete Clause Example (Cascading Restraint)

The example below is for general information only. Always have a lawyer tailor the wording, the activities, the areas and the time periods to your specific business and the person’s role.

Restraint

(a) The Employee acknowledges that, during their employment, they will have access to the Employer’s Confidential Information, trade secrets, client connections and Business Goodwill (Legitimate Interests).

(b) To protect those Legitimate Interests, the Employee must not, without the Employer’s prior written consent, either directly or indirectly, whether alone, jointly, as an employee, contractor, consultant, principal, shareholder, partner or otherwise:

    (i) Compete with the Business by providing the Same or Similar Services; or
    (ii) Solicit or attempt to solicit any Client or Prospective Client of the Business; or
    (iii) Induce or attempt to induce any Employee or contractor of the Business to cease their engagement,

in each case within the Restraint Area and for the Restraint Period.

Definitions

Business means the business carried on by the Employer at the Termination Date, being .

Same or Similar Services means services the Employee provided or had managerial responsibility for during the last 12 months of employment.

Client means any person or entity to whom the Business provided goods or services in the 12 months prior to the Termination Date and with whom the Employee had material dealings.

Prospective Client means any person or entity with whom the Business had active negotiations in the 6 months prior to the Termination Date and with whom the Employee had material dealings.

Restraint Period means each of the following periods (to be read as independent obligations, with the longer period prevailing to the extent enforceable):
    (A) 12 months
    (B) 9 months
    (C) 6 months
    (D) 3 months

Restraint Area means each of the following areas (to be read as independent obligations, with the larger area prevailing to the extent enforceable):
    (1) Australia
    (2) 
    (3) 
    (4)  kilometres of 

General

(c) The parties agree that each combination of Restraint Period and Restraint Area is separate, distinct and reasonable to protect the Legitimate Interests.

(d) If a court finds a combination unenforceable, the parties intend the restraint to be read down to the next shortest Restraint Period and smallest Restraint Area necessary to protect the Legitimate Interests.

(e) This clause applies in addition to any obligations of confidentiality and fiduciary duties and survives termination of employment for the Restraint Period.

Why This Structure Works

• It clearly identifies the legitimate interests you’re protecting.
• It limits activities to the same or similar services the person actually performed.
• It uses cascading timeframes and areas, which increases the chance a court will enforce at least a narrower version if needed.
• It sits alongside separate confidentiality obligations, which you should also include in your contract (and consider reinforcing with a Non-Disclosure Agreement when appropriate).

Drafting Pitfalls To Avoid

• Whole-of-industry bans that capture roles far beyond what the person actually did.
• National or global areas when your business operates in a single city.
• Long durations without a clear rationale.
• One-size-fits-all restraints across all staff. Adjust scope for the role and access.
• Buried definitions that make it unclear who counts as a “client” or what activities are “competitive.”

Where Should You Put Your Non-Compete?

For new hires, include the restraint in the signed Employment Contract before the person starts. That way, you have clear consideration (the job in exchange for the restraint) and alignment on expectations from day one.

For existing staff, it’s common to implement restraints when promoting them to a senior role or offering a pay rise/bonus. In those cases, use a short deed to formalise the new restraint and the consideration. If you’re going down that path, understanding what a deed is and how it works is helpful - see What Is A Deed.

Founders and key shareholders should address restraints in the Shareholders Agreement so everyone is bound by the same rules from the outset. This is especially important if a founder exits and could immediately set up a competing venture.

Practical Tips To Implement And Enforce Restraints

Set The Right Mix Of Restraints

Non-compete is just one tool. In many cases, a well-targeted non-solicitation and non-dealing restraint, combined with strong confidentiality and IP clauses, will provide robust protection without being overbroad.

Use Garden Leave To Bridge The Gap

If you have a lengthy notice period for senior roles, consider putting the person on garden leave during notice. They remain employed (and paid), but stay away from clients and confidential systems while you manage the handover. This can make a post-employment restraint feel more reasonable because part of the “cooling off” happens during paid notice.

Tailor The Clause To The Role

Align activities with what the person actually does and the sensitivity of what they know. For example, a Head of Sales with deep client relationships could have a 6-12 month client non-dealing restraint within your actual sales territories, while a junior with no direct client contact may have a shorter, narrower restraint.

Be Clear About “Clients” And “Prospective Clients”

Define both, and tie them to the period immediately before termination (for example, 6-12 months). This helps avoid arguments about whether someone truly counts as your client.

Onboarding And Exit Hygiene

• At onboarding, explain the restraint plainly and keep a signed copy on file.
• On exit, remind the person of their obligations in writing and provide a copy of the relevant clauses.
• Secure and audit return of all devices, documents and data access.

If You Suspect A Breach

Move quickly but calmly. Preserve evidence, write a formal letter pointing to the clause and the conduct, and seek undertakings to stop the activity. If needed, you can escalate to an injunction application. Clear, well-drafted restraints make this process smoother - and it’s wise to get legal support early via Restraint of Trade Advice.

When To Use A Standalone Non-Compete Agreement

For contractors or business-to-business relationships (for example, distributors or specialist consultants), a standalone Non-Compete Agreement and granular confidentiality terms often make sense. Make sure the restraint is aligned with the scope of the engagement - not broader.

A Note On Consideration

For new employees, the job itself is the consideration for the restraint. For existing employees, provide something tangible (such as a promotion, salary increase or bonus) in exchange for agreeing to the new restraint, and document it clearly (using a deed can help here - see What Is A Deed).

Common Alternatives To Consider

• Confidentiality and IP: Strong confidentiality clauses and processes, supported by a standalone Non-Disclosure Agreement where appropriate.
• Non-solicitation and non-dealing: Narrow restraints that target client and staff poaching (often easier to enforce than a wide non-compete).
• Notice and garden leave: Use paid notice strategically to reduce risk during the transition.

Key Takeaways

• Non-compete clauses are enforceable in Australia if they go no further than reasonably necessary to protect your confidential information, client connections and workforce stability.
• Draft restraints narrowly: define activities tied to the role, set realistic areas and choose a time period you can justify. Cascading (step-down) wording improves enforceability.
• Always combine non-compete with robust confidentiality, non-solicitation and non-dealing terms, ideally inside a signed Employment Contract before the person starts.
• Use practical tools like garden leave and clear exit processes to reduce risk and demonstrate reasonableness.
• For founders and key shareholders, include restraints in your Shareholders Agreement so expectations are aligned from day one.
• If a dispute looks likely, act quickly and get tailored Restraint of Trade Advice to protect your position.

If you’d like a consultation on drafting or reviewing a non-compete for your Australian business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.