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Non Compete Clause Australia: Is Yours Enforceable? (And What to Do Before You Sign or Leave)

Employers put non-compete clauses in almost every contract. Most are unenforceable. Here is how Australian courts decide, what the 2025 federal ban means, and how to get your contract reviewed for $49.

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You’re searching “non compete clause Australia” for one of two reasons. Either you’re about to sign a contract with a restraint in it and you want to know what you’re agreeing to, or you’re leaving a job and your old employer is waving the clause at you, threatening legal action if you go to a competitor or take clients with you.

Here is the position in plain English: most non-compete clauses in Australian employment contracts are wider than the law allows, and a large proportion are unenforceable. But you need to know which kind yours is before you act.

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The legal test

Restraints of trade are void at common law unless the employer proves the restraint is reasonably necessary to protect a legitimate business interest. Legitimate interests include confidential information, trade secrets, customer connections and (to a limited degree) workforce stability. Simply preventing competition is not a legitimate interest.

Courts look at the restraint’s duration, geographic area and scope of activity. A 12-month, Australia-wide ban on working in an entire industry for a mid-level employee will almost always fail. A 3-month restraint on soliciting the specific clients you personally managed will usually succeed. In New South Wales, the Restraints of Trade Act 1976 lets courts read down an overreaching clause to the extent that is reasonable; elsewhere, “cascading” clauses (12 months, or if not then 6, or if not then 3) attempt the same thing.

The 2025 change

The Commonwealth Government announced a ban on non-compete clauses for employees earning under the high-income threshold ($190,100 from 1 July 2026, indexed each July), intended to commence from 2027. Check the current status before relying on it, but the direction is clear: courts and Parliament are increasingly hostile to broad restraints on ordinary employees. Non-solicitation and confidentiality clauses are not affected and remain enforceable if reasonable.

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If you’re about to sign

Read the restraint clause, the confidentiality clause and the IP clause together. Ask: how long, how far, what am I barred from doing, and does it survive if I’m made redundant? Negotiate the period down, limit the scope to clients you actually dealt with, and get any concession in writing. Employers routinely agree to narrower restraints when asked; they just don’t offer.

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Putting it in writing — properly — is what turns a complaint into a claim.
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If you’re leaving and being threatened

  1. Don’t take documents, client lists or data. That converts a weak restraint case into a strong breach-of-confidence case.
  2. Get the clause reviewed against the legal test. Know whether it’s a “probably enforceable” non-solicit or a “probably unenforceable” blanket non-compete.
  3. Respond in writing. A calm, legally grounded response that explains why the clause is unreasonable, confirms you will honour your confidentiality obligations and invites them to identify the specific legitimate interest they’re protecting, is a sensible first step. They know the litigation costs and the odds.
  4. Injunction proceedings move fast.

Why a proper review beats guessing

The difference between “this clause is unenforceable” and “this clause is probably unenforceable but the non-solicit inside it is fine” is the difference between a clean move and an injunction application. The cost of getting it wrong runs to tens of thousands. The cost of getting the clause read properly against the case law is $49.

DIY vs Claim Done vs lawyer

Option Cost Applies the reasonableness test to your clause? Turnaround
Read forum posts and guess $0 No Immediate
Claim Done contract review $49 flat Yes: plain-English watch points and questions to raise About 5 minutes

Know where you stand before you sign or resign. Get your contract reviewed for $49, or a legal response to your employer’s threat for $49. Done in about 5 minutes. You approve it before it is sent.

What happens when you put it in writing — properly

Same problem. What a prepared case looks like.

Before — doing it yourself
You explain it over the phone.
They nod, promise, and forget.
Weeks pass. Nothing is on the record.
When it escalates, it is your word against theirs.
→
After — a formal Non-Compete Response
A formal Non-Compete Response lands in their inbox.
It cites the law and sets a deadline.
There is now a paper trail.
They know you are serious.
Send mine — $49 →Drafted in about 5 minutes. You read and approve it before anything is sent.
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Before you go...

Silence reads as acceptance — and the new job is waiting

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Employers rely on the deadline in their letter and on you being too worried to answer. A formal response that puts them to proof of a legitimate interest, offers only the confidentiality you actually owe and refuses the rest puts your position on the record — and it is the document a court will read first if they do apply for an injunction.
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