Non-Compete Agreement
A non-compete agreement restricts individuals from engaging in competitive activities during or after their engagement with your business.
What is a Non-Compete Agreement?
A non-compete agreement restricts a party — typically an employee, contractor, or departing business owner — from engaging in competitive business activities, soliciting clients or employees, or otherwise interfering with the business's interests for a defined period after the end of their engagement.
Australian courts apply strict scrutiny to non-compete clauses. They will only enforce restrictions that are no wider than reasonably necessary to protect the business's legitimate interests. Factors considered include the seniority of the individual, the geographic area covered, the duration, and the nature of the competitive restriction.
When do you need a Non-Compete Agreement?
- ✓As part of an employment contract for senior or key employees
- ✓When an employee leaves with access to sensitive client relationships or trade secrets
- ✓As part of a business sale, preventing the seller from immediately competing with the acquired business
- ✓When a contractor or consultant has gained deep knowledge of your client base and operations
Key provisions to include
Restricted Activities
Defines the competitive conduct prohibited — working for competitors, establishing competing businesses, soliciting clients.
Geographic Scope
The geographic area in which competitive activities are prohibited — should be no broader than necessary.
Duration
How long after departure the restrictions apply — typically 6–18 months for employees.
Non-Solicitation of Clients
Prohibition on approaching former clients during the restriction period.
Non-Solicitation of Employees
Prohibition on recruiting former colleagues during the restriction period.
Consideration
What the party receives in exchange for the restriction — this is required for the agreement to be binding.
Common mistakes to avoid
Making the restriction too broad in scope, geography, or duration — Australian courts will not enforce unreasonable restrictions
Not providing adequate consideration — an employee signing a non-compete after they start employment may receive insufficient consideration if nothing additional is given
Not tailoring restrictions to the individual's actual role and access to sensitive information
Frequently asked questions
Are non-compete clauses enforceable in Australia?
Yes, but only to the extent they are reasonable. Australian courts will not enforce a non-compete that is broader than necessary to protect the business's legitimate interests in confidential information, client relationships, or trade secrets. Factors include the individual's seniority, the geographic scope, and the duration.
What duration is typically enforceable for a non-compete?
For most employees, 6–12 months is the typical enforceable range. For very senior executives or business sale contexts, restrictions of 12–24 months are more defensible. Perpetual or very long-duration non-competes are rarely enforceable against individual employees in Australia.
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