Non-Compete Clause Example in Australia

Hiring and training great people takes time and money. When someone leaves, it’s natural to worry they’ll take your clients, know-how or momentum to a competitor.

That’s where a well-drafted non-compete clause can help. But in Australia, these clauses are only enforceable if they’re carefully tailored to protect a legitimate business interest - not to simply stop someone working.

In this guide, we’ll walk through what a non-compete is, how courts think about “reasonableness”, practical drafting tips, and plain-English examples you can adapt. We’ll also cover alternatives that often work better (and are easier to enforce) for Australian employers.

What Is A Non-Compete Clause In Australia?

A non-compete clause (sometimes called a “restraint of trade”) is a contractual promise that a departing employee, contractor or seller of a business won’t compete with your business for a period of time, in a set area, and for certain activities.

In employment contracts, non-competes usually sit alongside confidentiality, IP assignment and non-solicitation clauses. In sale-of-business agreements, non-competes can be broader and longer because the buyer is paying for goodwill.

If you want a standalone restraint (for senior staff or specific roles), a tailored Non-Compete Agreement can sit outside the employment contract to make the obligations crystal clear.

Are Non-Compete Clauses Enforceable In Australia?

Yes - but only if the clause goes no further than reasonably necessary to protect your legitimate business interests. Australian courts start from the position that restraints are void, then ask if the restraint is reasonable in the circumstances.

Legitimate interests usually include protecting confidential information and trade secrets, your client/customer relationships, and the goodwill you’ve built - not simply stopping competition.

When deciding reasonableness, courts typically look at:

• Scope of activities: What exactly is being restrained (e.g. providing a specific service or working in a particular role)?
• Geography: Where is the restraint applied (suburb, city, state, Australia-wide)?
• Duration: How long does it last (weeks, months, years)?
• Seniority and access: Did the person access clients, pricing, strategy or trade secrets?
• Industry context: How the market operates and how quickly information loses value.

For employees, restraint periods are usually short (often 3-12 months) and tied to the real risk. For a business sale, longer periods (e.g. up to 3-5 years) may be reasonable because goodwill is part of what’s been purchased.

Because “reasonable” is fact-specific, it’s smart to get tailored Restraint of Trade advice if the role is senior, the industry is unique, or the clause will be business-critical.

Non-Compete Clause Examples You Can Adapt

Below are plain-English examples to help you see how these clauses are built. Treat them as starting points only - always tailor scope, geography and time to your business and role.

1) Non-Compete (Employment) - Narrow, Role-Based

Purpose: For a manager or sales lead with access to clients and strategy in a defined region.

Non-Compete
For the Restraint Period and within the Restraint Area, the Employee must not, whether directly or indirectly, be engaged, employed or concerned in any business that competes with the Company’s in the , where the Employee would be performing substantially similar duties to those performed for the Company in the 12 months prior to termination.

Restraint Area: .
Restraint Period: or, if that is unenforceable, then or .

This clause does not prevent the Employee from holding up to 5% of the shares in a publicly listed company.

2) Non-Solicitation (Often Easier To Enforce)

Purpose: To protect client relationships without banning someone from working in the industry.

Non-Solicitation of Clients
For the Restraint Period, the Employee must not, in competition with the Company, solicit, canvass or deal with any Client with whom the Employee had material dealings in the 12 months before termination for the purpose of providing goods or services that are the same as or similar to the Company’s.

Non-Poach of Staff
For the Restraint Period, the Employee must not solicit or induce any employee or contractor of the Company (with whom the Employee worked in the 12 months before termination) to cease employment or engagement with the Company.

Restraint Period: , or if that is unenforceable then or .

3) Sale Of Business Non-Compete (Broader)

Purpose: Protects the goodwill the buyer has purchased; typically broader area and longer duration.

Vendor Restraint
The Vendor must not, for after Completion and within , be involved in any business that competes with the Business as conducted at Completion, including by owning, operating, advising or having any financial interest in a competing business.

This clause does not prevent the Vendor from being employed in a non-competing role or holding up to 5% of the shares in a publicly listed company.

Why Use “Cascading” Periods and Areas?

You’ll notice “or if unenforceable, then…” ladders for periods/areas. This “cascading” approach gives a court options to enforce the maximum reasonable restraint without striking out the clause entirely.

How To Draft A Reasonable Non-Compete (Without Overreaching)

Courts won’t rewrite an overbroad restraint for you. The safest path is to target your real risks and keep the clause proportionate. Here’s a practical checklist.

1) Define The Legitimate Interest

• List what you’re protecting: client connections, pricing, strategy, trade secrets, product roadmaps, supplier terms.
• Tie the restraint to the person’s actual access and role.

2) Narrow The Activities

• Restrain the specific services or roles the person actually performed (not the whole industry).
• Avoid blanket wording like “any competing business” unless the role truly spans your full offering.

3) Right-Size The Geography

• Limit the area to where you actually trade or where the person had influence (e.g. a radius around the office or the specific states/territories served).
• Use cascading areas to give flexible options (e.g. 50 km / 20 km / 10 km).

4) Keep The Duration Proportionate

• Shorter for employees (often 3-12 months depending on seniority and risk), potentially longer for sellers of a business.
• Use cascading periods to improve enforceability.

5) Combine With Strong Confidentiality

• Non-competes work best beside confidentiality and IP clauses that protect the core knowledge you’re worried about.
• A well-drafted Non-Disclosure Agreement can also be used when partnering or discussing deals with third parties.

6) Put It In The Right Document

• Include the restraint in your Employment Contract for staff (and ensure the position description matches the scope you’re restraining).
• For a senior hire or co-founder, consider a standalone Non-Compete Agreement or restraint deed signed at commencement or promotion.

7) Consider Garden Leave As A Practical Alternative

• Paid notice on garden leave can keep a person away from sensitive matters and client contact while knowledge “cools off”, often reducing the need for a hard post-employment ban.

8) Use Clear, Plain English

• Ambiguity is your enemy. Define “Client”, “Compete”, “Restraint Area/Period”, and exactly which activities are caught.
• Use examples in the clause where helpful (e.g. “including managing key accounts or pricing strategy”).

9) Update On Promotion Or Role Change

• If responsibilities expand, refresh the restraint so it reflects current risks and is supported by fresh consideration (e.g. pay rise, bonus, equity).

Alternatives (And Complements) To Non-Competes

Because non-competes are scrutinised closely, many businesses protect themselves with a layered approach that’s easier to enforce and more practical day-to-day.

• Non-solicitation of clients: Stops targeted poaching of customers you’ve invested in - often more enforceable than a full non-compete.
• Non-poach of staff: Helps maintain team stability during transitions.
• Confidentiality and IP assignment: Core protection for trade secrets, source code, pricing, and brand assets (use a robust confidentiality clause or a separate Non-Disclosure Agreement when needed).
• Return of property and data security: Make exit obligations clear, including devices, files and credentials.
• Garden leave: Keep the person employed and paid during notice while restricting duties and client contact - reducing immediate competitive risk.
• Settlement deeds on exit: For sensitive departures, a tailored Deed of Release and Settlement can include reaffirmed restraints, additional confidentiality and non-disparagement commitments.
• Non-disparagement: If reputational risk is key, consider targeted wording (see our guide to non-disparagement agreements).

When Should You Use A Non-Compete (And When To Rethink It)?

Non-competes can make sense when the role truly exposes your business to competitive harm if the person immediately joins a rival. Common scenarios include:

• Senior sales or account roles with direct access to key clients and pipelines.
• Product, strategy or leadership roles with insight into pricing, roadmaps or sensitive planning.
• Specialist technical roles where know-how would quickly benefit a competitor.
• Sale of business, where the buyer is paying for goodwill.

On the other hand, if the role is junior, widely available in the market, or has limited exposure to sensitive information, a narrow non-solicitation and strong confidentiality clause may be more appropriate (and more likely to stick).

Step-By-Step: Implementing Non-Competes In Your Business

1) Map Your Real Risks

Identify the roles, information, clients and territories that genuinely need restraint protection. If you wouldn’t enforce it in practice, don’t include it.

2) Choose The Right Legal Vehicle

Decide whether the restraint sits in your standard Employment Contract (most roles), a standalone restraint deed for senior hires, or as part of transaction documents in a business sale.

3) Draft Proportionate Clauses

Use clear definitions, narrow activities, realistic areas and cascading periods. Align the clause with the person’s actual duties and access. Keep the carve-outs (like passive shareholdings) sensible.

4) Communicate At Offer Stage

Be upfront during recruitment. Provide the candidate time to review and get advice. Transparency helps with buy-in and later enforcement.

5) Refresh On Promotion

When roles change, update restraints and provide fresh consideration (e.g. new title, salary or equity). Consider using a deed format for clarity on execution and enforceability; if you’re unfamiliar with deeds, here’s a helpful primer on what a Deed is in Australian law.

6) Manage Exits Thoughtfully

Collect property and revoke access, remind the departing person of their ongoing obligations, and decide whether garden leave is appropriate. For complicated departures, a settlement deed can tidy up issues and reaffirm restraints.

Common Pitfalls To Avoid

• Overreach: Blanket “industry-wide” bans, nationwide restraints for local roles, or long durations with no justification will be difficult to enforce.
• Copy-paste clauses: Lifting a clause from another business without tailoring often misfires - your roles, clients and areas are different.
• Vague definitions: If “Compete” or “Client” isn’t defined, expect arguments later. Precision helps you and the court understand what’s prohibited.
• Forgetting the basics: Strong confidentiality, IP and non-solicitation provisions are often your best line of defence. Don’t rely on a non-compete alone.
• No follow-through: If you never enforced restraints before, a sudden hardline stance is riskier. Document your approach and be consistent.

FAQ: Quick Answers For Employers

Can I stop a former employee from working for any competitor?

Not just because they’re a competitor. Your restraint must be no wider than necessary to protect legitimate interests, and tailored to the person’s role, location and access.

What’s a “reasonable” restraint period for employees?

It depends on the role and risk. Many businesses use cascading periods (e.g. 9/6/3 months). Senior roles may justify longer than junior roles.

Do restraints apply to contractors?

Yes - but the same reasonableness test applies. Tailor the scope to the services and information the contractor actually accessed.

Are non-competes easier to enforce in a business sale?

Generally yes, because the buyer is paying for goodwill. Courts are more willing to enforce broader and longer restraints in sale-of-business scenarios.

Key Takeaways

• In Australia, non-compete clauses are enforceable only if they’re no broader than reasonably necessary to protect your legitimate business interests.
• Draft restraints with tight scope, realistic areas and cascading periods - and always pair them with strong confidentiality, IP and non-solicitation protections.
• For many roles, a focused non-solicitation clause is more practical (and more enforceable) than a broad non-compete.
• Use the right document: your core Employment Contract for most hires, a standalone Non-Compete Agreement or deed for senior roles, and robust restraints in sale-of-business deals.
• Manage offers and exits carefully - consider garden leave and, for sensitive departures, a Deed of Release and Settlement to wrap things up.
• If a restraint is critical to your business, get tailored Restraint of Trade advice before you rely on it.

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