Employment Restraints

Restraint of trade clauses try to stop you working for a competitor, starting your own business, dealing with clients or hiring former colleagues after you leave. In Western Australia they are void unless they are reasonable. We can tell you whether yours is likely to be enforced and what the risks are.

When you change jobs or set up your own business, the clients, contacts and industry knowledge you have built up are often your most valuable asset. Your old employer may see them as its asset. That is where post-employment restraints come in, and why they are one of the most common reasons people call us before they resign.

The good news is that a restraint is not automatically enforceable just because you signed it. The not-so-good news is that some are, and breaching one can lead to an urgent court injunction. Getting advice before you resign, and before you contact any clients, is almost always cheaper than getting it afterwards.

What Is A Post-Employment Restraint?

A post-employment restraint is a term in your employment contract (or a separate deed, share plan or settlement agreement) that restricts what you can do after your employment ends. The common types are:

  • Non-compete: you must not work for, or run, a competing business for a period, sometimes within a defined area.
  • Non-solicitation: you must not approach the employer's clients or customers to take their business.
  • Non-dealing: you must not deal with those clients at all, even if they approach you.
  • Non-poaching (non-recruitment): you must not entice the employer's staff to leave.

The Starting Point: Void Unless Reasonable

At common law, which is the law that applies in Western Australia, a restraint of trade is contrary to public policy and void unless it is reasonable. The High Court restated the approach in Peters (WA) Ltd v Petersville Ltd [2001] HCA 45. To be enforced, the restraint must be:

  1. reasonable as between you and your employer, meaning it gives the employer no more than adequate protection of a legitimate interest; and
  2. not against the public interest.

The employer seeking to enforce the restraint has to prove it is reasonable. (New South Wales is different: its Restraints of Trade Act 1976 lets a court read an unreasonable restraint down. There is no equivalent Act in WA.)

What Counts As A Legitimate Interest

An employer is never entitled to protection from competition as such. It can only protect interests such as:

  • Confidential information and trade secrets, such as pricing, client terms, business plans and technical information. General skill and know-how that you carry in your head is usually yours to use.
  • Customer connection, where you became the face of the business to clients, or could take their business with you. Frequent contact or a friendly relationship is not enough on its own.
  • A stable, trained workforce, which can support a non-poaching clause. But an employer has no legitimate interest in stopping you from leaving.
When Will A Court Enforce A Restraint?
When Will A Court Enforce A Restraint?

The court first works out what the clause actually means, and then asks whether it is reasonable. Reasonableness is judged at the date the contract was made, looking at what the clause allows the employer to stop, not at what the employer is asking for now. The court looks at:

  • Scope: what activities and which clients it covers. A clause that stops you working in any role for any business in the industry, or that covers clients you never dealt with, is more likely to be too wide.
  • Duration: for client restraints, roughly the time it would take the employer to put a replacement in front of the clients and for your connection with them to fade.
  • Area: no wider than the area where the business actually operates. Where the restraint is tied to named clients, or the work is done remotely, geography matters less.
  • Your role: restraints are more readily upheld against senior people with access to strategy and key relationships than against junior staff.

Each element can be reasonable on its own, yet the combination can still make the restraint unreasonable: Cream v Bushcolt Pty Ltd [2004] WASCA 82. A clause saying you "acknowledge the restraint is reasonable" is relevant, but it does not decide the question: Habitat 1 Pty Ltd v Formby [No 2] [2017] WASC 331.

Cascading clauses. Many contracts use "step-down" restraints, for example 12, 9, 6 or 3 months, and several areas. Courts have accepted these as a legitimate way to let the court enforce the widest combination that is reasonable, rather than striking the whole restraint down: Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267. A court can only strike out the parts that go too far; it will not rewrite a clause to save it. That is the law today, but the draft Bill described in the note on law reform below would ban cascading restraints.

If your employer ended the contract wrongfully, for example by dismissing you without the notice the contract required, it generally cannot then enforce the restraint: Crowe Horwath (Aust) Pty Ltd v Loone [2017] VSCA 181.

Obligations That Apply Even Without A Restraint

Even if your restraint is unenforceable, or you do not have one, you must not take or use your employer's confidential information, such as client lists, pricing or documents, for a new job or business. That obligation comes from your contract, from equity and, for company officers and employees, from the Corporations Act 2001 (Cth). It lasts after you leave.

While you are still employed you also owe your employer a duty of fidelity, so preparing to compete is one thing, but soliciting clients or staff before you leave is another. Forwarding documents to a personal email address in your last weeks is one of the most common ways people get into trouble.

A note on law reform. The federal government released an exposure draft Bill on 7 September 2026, with submissions due by 2 October 2026 and a planned start in 2027. The exposure draft proposes banning non-compete clauses for employees earning up to the high income threshold and for all casuals, banning clauses that stop you approaching former co-workers (co-worker non-solicitation) for all national system employees whatever their income, and banning cascading restraints outright. Existing restraints would keep applying unless the arrangement is varied after the start date. As at 1 October 2026 the Bill is not law, and restraints continue to be judged under the common law described on this page.

Obligations That Apply Even Without A Restraint
What To Do If You Have A Restraint

If You Are An Employee About To Leave

  1. Get your contract, and any share plan or bonus documents, and read every restraint and confidentiality clause.
  2. Get advice before you resign or tell anyone about your plans, so you can time your exit and plan your next role around the restraint.
  3. Do not take, copy or forward any documents or client information.
  4. Do not contact clients or colleagues about moving until you know where you stand.
  5. If your new employer asks, give them a copy of the restraint. Many will structure your role to avoid a dispute.

If You Receive A Letter Of Demand

Take it seriously and get advice quickly. An employer can apply for an urgent (interlocutory) injunction, and at that early stage it only needs to show that it is arguable the restraint goes no further than necessary to protect its business: Safety Direct Solutions Pty Ltd v Challen [2020] WASC 34. Courts rarely refuse to enforce a valid restraint on the basis that damages would be enough. A negotiated outcome, such as an agreed narrower restraint or an undertaking, is often the best result for both sides.

If You Are An Employer

A restraint that is drafted for the actual role, protects a real interest and goes no further than necessary is far more likely to be enforced than a generic, industry-wide ban. We can review your template contracts, and act quickly if a former employee takes your clients or confidential information.

How We Can Help

We can tell you whether your restraint is likely to be enforceable, negotiate a release or a narrower restraint, and defend or bring injunction proceedings. Read more about how we help with restraints of trade, or contact us for a free confidential discussion.

Case studies

How the law played out in real cases

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Published decisions of courts and tribunals, summarised in plain English from the published decision. Every case turns on its own facts.