What Does Just Group Ltd v Peck Mean for Restraint of Trade Clauses in Australia?

Restraint of trade clauses are common in Australian employment contracts, especially for senior or client-facing roles. But when do they go too far? If you’re hiring, promoting, or managing the exit of key staff, it’s important to understand how courts look at restraints so you can protect your business without drafting terms that won’t hold up.

A leading decision in this area is Just Group Ltd v Peck. In 2016, the Victorian Court of Appeal closely examined an executive restraint and confirmed an important principle: a restraint must be no wider than reasonably necessary to protect the employer’s legitimate interests. The case has become a touchpoint for HR teams and business owners across Australia.

In this guide, we’ll unpack what restraint clauses do, what the Court actually decided in Just Group v Peck, how “reasonableness” is assessed, and practical tips for drafting and enforcing restraints today. If you’re building a team and want to safeguard clients, confidential information and goodwill-without relying on unenforceable terms-read on.

Restraint Of Trade Clauses: What Are They And Why Do They Matter?

A restraint of trade clause limits what a person can do after their employment ends. Most commonly, restraints are designed to protect three things:

• Confidential information and trade secrets
• Customer and supplier connections
• The goodwill of your business

Typical post-employment restraints include:

• Non-compete: restricting a former employee from working for a competitor or starting a competing business for a set period and area
• Non-solicit: preventing the poaching of your clients, prospects, or staff
• Non-deal: prohibiting dealings with your customers even if they approach the former employee

These clauses are not automatically enforceable in Australia. They must be “reasonable” having regard to the role, the industry, the information at risk and the real-world geographic reach of your operations. If a restraint goes beyond what’s necessary to protect your legitimate interests, it can be struck down.

It’s also worth distinguishing non-compete obligations from other tools you can use during or after employment. For instance, paid notice, garden leave and confidentiality clauses serve different purposes and sometimes offer more practical protection than a broad non-compete. If you’re weighing up options, it can help to consider whether a targeted non-compete agreement is required or whether other measures will do the job.

The Facts And Findings In Just Group Ltd v Peck (2016)

Just Group Ltd v Peck is a 2016 decision of the Victorian Court of Appeal. The case involved a senior executive who, after leaving Just Group (a national fashion retailer), was restrained by contract from working for a competitor for an extended period across a wide geographic area.

The employer argued a broad restraint was needed because the executive had access to sensitive information and strategic plans. The former employee challenged the clause, contending it was unreasonable and effectively prevented her from working in her chosen field.

The Court of Appeal found the restraint went further than reasonably necessary to protect Just Group’s legitimate interests. In particular, the timeframe and scope of the non‑compete were out of step with the risk profile and the evidence before the Court. The restraint was therefore unenforceable.

Two practical messages employers still rely on from Just Group v Peck are:

• Reasonableness is the touchstone: courts won’t enforce a restraint that is longer, broader or more restrictive than necessary in the circumstances.
• Drafting precision matters: “belt and braces” restraints that try to cover every possibility can backfire if none of the options are reasonable on the evidence.

Does a court ever “rewrite” an unreasonable restraint? Outside New South Wales, courts generally won’t rewrite an overbroad clause, though they may sever distinct, reasonable parts (especially where you use clearly separate “cascading” covenants). In New South Wales, the Restraints of Trade Act 1976 gives courts a statutory power to modify restraints to the extent they are reasonable. That means outcomes can differ by jurisdiction, and your drafting strategy should account for where the contract operates.

What Does “Reasonable” Look Like In Practice?

Restraints are assessed at the time the contract is made. The court asks whether the clause is reasonably necessary to protect the employer’s legitimate interests, balanced against the employee’s right to work and the public interest in free competition.

Key Factors Courts Consider

• Role and seniority: senior executives with strategic oversight or deep access to commercial plans may justify a longer or wider restraint than a junior role.
• Nature of information: protecting trade secrets and confidential data can justify stronger restraints; generic industry know‑how usually cannot.
• Customer connection: where success hinges on personal relationships, a tailored non‑solicitation or non‑dealing restraint may be more appropriate than a blanket non‑compete.
• Geography and market reach: the restraint area should mirror your actual footprint-city, region, state or nationwide-not the broadest conceivable territory.
• Duration: the period should reflect how long the information remains competitively sensitive or how long customer relationships are at risk.

How Cascading Clauses Fit In

Many contracts use “cascading” (or “laddered”) restraints-multiple alternative periods and areas (for example, 3 months/6 months/12 months; suburb/state/national). The idea is that if a tougher step is unreasonable, a narrower step might still survive.

Cascading drafting is a useful tool, but it’s not a cure‑all. If all steps are still too broad for the role and evidence, a court may decline to enforce any of them. The lesson from Just Group v Peck is to ensure at least one step is genuinely defensible on the facts.

Drafting Restraints That Are More Likely To Be Enforceable

Well‑calibrated restraints begin with clarity about what you’re protecting. Then you limit the restriction to the least intrusive measure that will do the job. Below is a practical, step‑by‑step approach you can adapt to different roles and industries.

1) Identify Your Legitimate Interests

Start by naming the specific interests at stake. Is it strategic pricing information? Product roadmaps? A prospect pipeline? Supplier terms? The clearer you are, the easier it is to tailor the restraint and justify it later.

2) Choose The Right Restraint Type

A non‑compete is the most restrictive option and is scrutinised closely. Ask whether a targeted non‑solicit or non‑deal clause could protect customer and staff relationships without preventing the employee from working in the field altogether. If you do need a non‑compete, pair it with well‑drafted confidentiality and IP clauses for layered protection.

3) Calibrate Time And Geography

Pick a timeframe linked to the risk window-how long until information is stale or relationships settle? For many commercial roles, 3–6 months may be reasonable; for some executive roles, 6–12 months might be justified with evidence. For area, align to where you actually trade or plan to expand in the restraint period-city, region, specific states, or nationwide (only if warranted).

4) Define Restricted Activities Precisely

Vague phrases like “the fashion industry” or “any competing business” invite challenge. Specify the competitors, channels, or functions that create risk. For example, limit the restriction to roles involving strategy, pricing, product development or key account management where the confidential information is most relevant.

5) Consider Cascading Steps-But Make Each One Defensible

If you include cascading options for time and area, ensure the narrowest options are clearly reasonable for the role. A ladder of 24/18/12 months won’t help if 12 months is still too long on the facts.

6) Build A Restraint Suite, Not A Single Clause

Pair the restraint with strong confidentiality and IP provisions, clear post‑employment obligations and practical tools like garden leave for senior roles. During garden leave, the employee remains employed (and paid) but is kept away from day‑to‑day operations to allow information to lose currency. For context on how this fits, see how Australian employers use garden leave in practice.

7) Use The Right Contract Framework

Your contract is the foundation. Ensure you have the correct Employment Contract for the role and update it when responsibilities change. For senior hires, consider bespoke terms that reflect the actual risks and responsibilities of the position rather than a one‑size‑fits‑all template.

8) Keep Jurisdiction In Mind

Remember the NSW Restraints of Trade Act 1976 allows courts to “read down” restraints to a reasonable level. In other states and territories, courts apply common law principles and may sever distinct covenants, but they won’t generally rewrite a single overbroad covenant. If your workforce spans multiple jurisdictions, your drafting should contemplate that.

9) Document The Commercial Rationale

If a dispute arises, your ability to point to contemporaneous evidence-strategy documents, risk assessments, client concentration, product launch timelines-can be persuasive. Capture the rationale at the time of hiring or promotion.

If you’d like help calibrating a restraint to a particular role or industry, our team provides tailored restraint of trade advice so your contract reflects your real‑world risks.

Enforcing Or Challenging A Restraint: Practical Steps

Whether you’re an employer considering enforcement or an employee evaluating your options, timing and evidence matter. Here’s how matters typically unfold.

If You’re An Employer

• Assess the conduct: confirm what the former employee is doing, which clause is implicated (non‑compete, non‑solicit, non‑deal), and whether the activity falls within the defined time and area.
• Gather evidence: collect documents and data that show customer poaching, staff targeting, or misuse of confidential information (emails, CRM notes, LinkedIn announcements, messages from clients).
• Send a proportionate letter: a targeted letter pointing to the specific obligations and conduct can often resolve matters quickly. Where appropriate, a carefully framed letter of demand or cease and desist letter sets expectations and preserves your position.
• Consider an injunction: for urgent, ongoing risk (e.g., an imminent market launch using your trade secrets), discuss interim relief with your legal team. You’ll need strong evidence and to move quickly.
• Weigh commercial outcomes: sometimes a negotiated solution-limited undertakings, a shorter restraint, or a targeted non‑deal-protects the business without drawn‑out litigation.

If You’re An Employee

• Get the contract reviewed: understand precisely what you signed, what jurisdiction applies, and whether the clause is likely to be enforceable for your role and industry.
• Map the risk: plan your next role to avoid obvious breaches. Where possible, consider roles outside the restraint scope, area or timeframe.
• Negotiate guardrails: employers often accept pragmatic undertakings (for example, no contact with a named client list for 6 months) rather than pressing broad non‑competes.

Disputes can arise alongside other exit issues. If you’re formalising a departure, an Employee Separation Agreement can capture agreed restraints, confidentiality, IP and releases in one document to reduce future friction.

And if you’re putting new contracts in place, consider whether you need a narrow non‑compete in addition to confidentiality and non‑solicit terms, or whether targeted post‑employment restrictions in your non‑compete agreement are sufficient for the role. If a situation is urgent or complex, our employment law team can help you assess your options and act quickly.

Key Takeaways

• Just Group Ltd v Peck (2016, Victorian Court of Appeal) confirms that restraints must be no wider than reasonably necessary to protect an employer’s legitimate interests.
• Courts look closely at duration, geography, role, information sensitivity and customer connections; vague or blanket non‑competes are high‑risk.
• Cascading clauses can help, but only if at least one step is genuinely reasonable on the evidence-drafting “everything and the kitchen sink” can backfire.
• Jurisdiction matters: NSW courts can modify restraints under the Restraints of Trade Act 1976; elsewhere, courts apply common law and may sever distinct covenants but won’t rewrite an overbroad clause.
• Practical protection often comes from a suite of measures-confidentiality, IP ownership, targeted non‑solicit/non‑deal terms, garden leave-supported by a tailored Employment Contract.
• If enforcement is on the table, act quickly and proportionately, with evidence in hand; many disputes resolve via targeted undertakings or documented separation terms.

If you would like a consultation on drafting, reviewing or enforcing restraint of trade clauses for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.