I have a non-compete clause
Restraint of trade basics in Australia — what non-compete clauses mean, whether they're enforceable, and how to handle them.
What is a non-compete clause?
A non-compete clause (also called a restraint of trade) is a term in your employment contract that restricts what you can do after leaving your job. It might prevent you from working for a competitor, starting a competing business, or soliciting your former employer's clients — for a specified time and within a specified area. These clauses are common in sales, management, and professional services roles.
Are they enforceable in Australia?
Non-compete clauses are not automatically enforceable. Australian courts start from the position that restraints of trade are void unless the employer can prove they're reasonable. The employer must show the restraint protects a legitimate business interest (like trade secrets or client relationships), is reasonable in duration and geographic scope, and goes no further than necessary. A clause preventing you from working anywhere in Australia for 5 years is almost certainly unenforceable. A clause preventing you from working for direct competitors in Melbourne for 6 months is more likely to hold up.
What makes a clause more likely to be enforced
Courts are more likely to enforce a non-compete if: you had access to genuine trade secrets or confidential information, you had strong personal relationships with clients, the time period is short (3-12 months), the geographic area is limited, you were a senior employee or partner, and you received something in return for agreeing to the restraint (like a payout or sign-on bonus).
What makes a clause less likely to be enforced
Courts are less likely to enforce a non-compete if: it's too broad in scope, time, or geography, you're a junior or mid-level employee, the employer didn't have genuine confidential information at risk, you were dismissed (especially if unfairly), the clause just aims to eliminate competition rather than protect a legitimate interest, or you received no specific benefit for agreeing to the restraint.
Cascading clauses
Many contracts include 'cascading' restraint clauses — for example, 24 months within Australia, OR 12 months within New South Wales, OR 6 months within Sydney. If a court finds the widest restraint unreasonable, it can 'read down' to the narrower version. This increases the employer's chances of enforcing at least some restriction. Check your contract for this structure.
What to do
1. Read your contract carefully and identify exactly what the restraint covers, how long it lasts, and where it applies. 2. Don't assume it's unenforceable — some are. 3. If you want to leave for a competitor, get legal advice before resigning. Many employment lawyers offer a fixed-fee review of restraint clauses. 4. Negotiate — your employer may agree to waive or narrow the restraint, especially if you leave on good terms. 5. If your employer threatens legal action, don't panic — they still have to prove the clause is reasonable in court.
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General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.