Post-Employment Restraints

Overview

Post-employment restraints — commonly referred to as non-compete, non-solicitation, and non-dealing clauses — are contractual provisions that restrict what an employee can do after their employment ends. They are a regular feature of employment contracts, partnership agreements, and share sale arrangements, particularly for senior employees, client-facing staff, and those with access to confidential information or trade connections.

In Australia, restraint of trade clauses are presumed to be void and unenforceable unless the party seeking to rely on them can demonstrate that the restraint goes no further than is reasonably necessary to protect a legitimate business interest. This means that not every restraint will hold up if challenged — enforceability depends on the specific circumstances, including the seniority of the employee, the nature of the business, the scope of the restriction, and the geographic and temporal limits imposed.

Employers often assume their restraint clauses will be enforceable simply because they are in a signed contract. Equally, departing employees sometimes assume restraints are never enforceable and can be ignored. The reality sits somewhere in between, and the outcome often turns on how well the clause was drafted and whether it is proportionate to the interest being protected.

Key Considerations

The enforceability of a restraint clause will depend on whether the employer can point to a legitimate business interest that warrants protection. The most commonly recognised interests are confidential information, client relationships, and the stability of the workforce. A clause that simply seeks to prevent competition in general, without being tied to a specific protectable interest, is unlikely to be upheld.

Courts assess reasonableness at the time the contract was entered into, not at the time the restraint is sought to be enforced. This means a clause that may have been reasonable when an employee was first engaged could become disproportionate if their role changed significantly during the course of employment without the restraint being updated.

Most well-drafted restraints use a cascading or “ladder” structure — specifying multiple timeframes and geographic areas in descending order. This gives the court the option to read down the clause to a level it considers reasonable, rather than striking the entire restraint out. If a clause is drafted as a single fixed period and area, it is all or nothing.

Interim injunctions are the primary remedy where a breach is alleged. Courts can act quickly to restrain a departing employee from competing or soliciting, but an employer will typically need to demonstrate a prima facie case, that damages would not be an adequate remedy, and that the balance of convenience favours granting the injunction.

The practical enforceability of a restraint also depends on what happens at the point of departure. How the exit is managed, whether the employee is reminded of their obligations, and whether the employer acts promptly if a breach is suspected all influence the outcome.

How We Can Help

We advise employers and employees on all aspects of post-employment restraints — from drafting and reviewing clauses at the contract stage, through to enforcement, defence, and urgent injunctive relief when a dispute arises. We regularly act in restraint matters in the Federal Court, Supreme Courts, and interlocutory proceedings where time is critical.

Whether you need to understand your obligations before starting a new role, or you are concerned that a departing employee is about to breach their restraints, we can provide clear, practical guidance tailored to your situation.

Speak With Our Team

If you are navigating a post-employment restraint issue — whether as an employer or an employee — we are happy to have a confidential conversation about your circumstances and options.