Hi there. Sometimes employment contracts contain a ‘non-compete’ or ‘restraint of trade’ clause, which is a term of the contract that says one party (the employee) agrees not to engage in trade that would compete with the other party to the contract (the employer). A restraint of trade clause usually remains in force even after the employment contract has ended.

Australian law says that a restraint of trade clause must be reasonable in the interests of the parties to the contract. This means that, if an employer wants to rely on the restraint clause, they will need to show that the clause protects their legitimate business interests and does not go beyond what is necessary to protect those interests. The restraint clause must also be reasonable in the interests of the public – in other words, the clause must not be contrary to or interfere with the public interest. Importantly, a restraint of trade clause cannot be used simply to reduce or avoid competition.

If you wait the specified 6 month period and comply with all other terms of the restraint clause, you will not be in breach of the restraint clause. However, if you do not follow the terms of the restraint clause you may be in breach of the contract (and therefore liable to pay compensation to the employer), unless the restraint clause is not reasonable in the interests of you, the employer and the public. If the restraint is unreasonable, a court may deem the clause to be invalid.

Suggested way forward

Breaching a restraint of trade clause can have significant consequences. You should consider speaking to an employment lawyer who can advise you of your legal rights and options. By pressing the “Consult a Lawyer” button, LawAdvisor can help you search for experienced lawyers and obtain fee proposals for their services. Costs for legal advice and representation will vary between providers based on experience and the scope of services.