Authored by Katarina Klaric, Principal, Stephens Lawyers & Consultants
Businesses invest significant amounts of money and resources through marketing and business development activities to build and maintain their client base. Client lists and databases are valuable assets of the business, comprising of confidential information including client names, contact details, contracts, tenders, products and/or services supplied to the client, pricing and financial information. In industry sectors involving the supply of health services, disability (NDIS) services, treatment plans against hair or weight loss and well-being or beauty services, the client databases may also contain confidential personal and sensitive information relating to clients, including medical and health records. Considerable costs are also incurred by businesses in education, training and development of knowledge and skills of employees. Non-compete/restraint clauses are commonly used in employment agreements to protect legitimate business interests and prevent employees from taking clients to competitors or starting a competitive business. The non-compete/restraint clauses are generally for a specified period of time and/or specified area or territory.
Non-compete/restraint clauses are prevalent in highly competitive services industry sectors including franchising, financial services, real estate, education, health, disability (NDIS), hair and beauty. In some sectors, employees are able to secure significant financial benefits for themselves from competitors, where they are able to bring across to the competitor, clients from their existing or former employer.
In addition to non-compete clauses, other contractual restraints can be used to protect confidential information and other legitimate business interests. These include:
- Confidentiality or non-disclosure agreements which impose confidentiality obligations on the employees and contractors and prohibit the unauthorised disclosure or use of confidential information obtained or accessed whilst employed by the business.
- Non-solicitation clauses which prohibit employees/contractors or former employees/contractors from contacting clients of the business to leave the business and become clients of a competitor’s business or a business that has been set up by the employee/contractor.
- Non-solicitation clauses which prohibit employees/contractors or former employees/contractors approaching existing employees of the business to leave the business and join a competitor or a business that has been set up by the employee/contractor.
Non-compete/restraint clauses are important for preserving significant investment in business development and client relationships, and maintaining workforce stability and continued investment in training, education and development of knowledge and skills of employees.[i] Courts will enforce non-compete/restraint clauses where those clauses are reasonable having regard to the legitimate interests of the employer and if required to protect the legitimate business interests of the business.[ii]
| Case Example
Care Legion Pty Ltd v Addo [2025] VCC 634 (25 May 2025) The Court made declarations that the Defendant, an NDIS care worker, had breached her contractual and fiduciary duties to Care Legion Pty Ltd (ABN 57 642 869 136) (“Care Legion”), an NDIS service provider by: a. soliciting, enticing away, interfering with, and endeavouring to solicit entice away or interfere with, clients of Care Legion while employed by Care Legion and during the post-termination restraint period in her Employment Contract; and b. using Confidential Information concerning Care Legion clients obtained in the course of her employment for the purpose of soliciting, enticing away, interfering with or endeavouring to solicit, entice away or interfere with such clients. The Court also granted injunctive relief restraining the Defendant from using confidential information concerning any Care Legion client obtained in the course of her employment for the purpose of soliciting, enticing away, interfering with or endeavouring to solicit, entice away or interfere with such client. The Defendant was ordered to deliver up all Care Legion’s confidential information which was still in the defendant’s possession and pay Care Legion compensation in the sum of $109,929.80. Background Post employment termination restraint The Defendant’s employment contract with Care Legion contained an express post-termination restraint: (a) Not to solicit, entice away or interfere with (or endeavour to do so) any past or former client with whom the Defendant had dealings with during the last 12 months of her employment with Care Legion (clause 26.1a); and (b) Not to interfere, to Care Legion’s detriment, with its relationship with any clients (clause 26.1d).[iii]” In considering the enforceability of the post-employment restraint clauses, the court referred to the NSW Supreme Court decision of Tullett Prebon (Australia) Pty Ltd v Purcell.[iv] That case considered the enforceability of non-competition clauses and the concept of “gardening leave” in employment contracts and found that client contact details are legitimate interests for an employer to protect. Justice Brereton stated: “Whether a restraint is reasonable having regard to the interests of the parties depends on two, albeit related, considerations: first, whether the covenantee has a legitimate protectable interest, and secondly, whether the restraint is no more than reasonable for the legitimate protection of that interest. A covenantee is not entitled to be protected against mere competition; the legitimate interests which may be the subject of protection by covenant are in the nature of proprietary subject matter….including trade secrets and confidential information, and goodwill including customer connection.” (emphasis added).”[v] The post-employment restraint in the Care Legion contract was held to be enforceable as on its proper construction it was limited in scope and did not stop the Defendant from competing with Care Legion. The restraint “merely restrained her from interfering with Care Legion clients and the relationship between Care Legion and its clients for a period of 12 months.”[vi] On the evidence, the court held that the Defendant had breached her post-termination restraints under the employment agreement “because her conduct involved interfering with Care Legion’s relationships with its clients and enticing away clients with whom she had dealings”.[vii] Breach of fiduciary duties and duties of confidence during employment The court held that the Defendant, as an employee of Care Legion, was under fiduciary duties “not to improperly make a profit or gain a benefit or an advantage for herself or someone else, by reason of her position as an employee or by reason of taking advantage of an opportunity or knowledge derived in consequence of her employment, and to protect and keep confidential the confidential information of Care Legion”.[viii] The court found that the Defendant, during her employment with Care Legion, had breached her fiduciary duties to Care Legion and her obligations of confidence by using and disclosing Care Legion’s confidential information to Care Legion’s competitors for the purpose of seeking to personally gain a profit and/or employment from competitors and seeking to gain advantage for herself or to cause detriment to Care Legion.[ix] There was evidence before the court that the Defendant, whilst still employed by Care Legion, had contacted a competitor of Care Legion and had sought re-imbursement of monies spent on gift cards to win over clients to move to the competitor and had also sought 50-50 share of revenue for clients referred to the competitor. The Defendant denied any wrong doing.[x] Breach of obligations of confidence following termination of employment The evidence before the court indicated that following the termination of the Defendant’s employment with Care Legion, she continued to use Care Legion’s confidential information which she obtained by reason of her employment for her own benefit or the benefit of Care Legion’s competitors – including confidential information about Care Legion’s clients not in the public domain – their names, contact details, addresses, health information, support details and details of services. She never deleted the confidential information on termination of her employment[xi]. The Court held that the Defendant had breached her duties of confidence to Care Legion. The Defendant has made an application to the Supreme Court of Appeal for leave to appeal the decision. |
Australian Government’s proposed reforms to unfair non-compete clauses and other restraints on workers
On 25 March 2025, the Australian Government announced a proposal to ban non-compete clauses for employees earning less than the high-income threshold in the Fair Work Act 2009 (Comm) together with proposals for further complementary reforms to close loopholes in the Competition and Consumer Act 2010 (Comm) that may currently allow businesses to make anti-competitive agreements that cap wages or conditions, or prevent staff from being hired by competitors.[xii] The Government has been consulting on important policy details for the proposed ban, as well as on potential additional reforms to other restraints on employees, including those earning above the high-income threshold.
Submissions to the Government’s most recent Consultation Paper – ‘Reform to non-compete clauses and other restraints on workers”[xiii] – closed on 5 September, 2025. The Consultation Paper asked whether we need reforms for non-compete clauses for high-income workers, non-solicitation clauses and employment restrictions on having multiple jobs. Sixty-seven submissions were provided. Whilst many submissions agreed with a proposed ban on non-compete clauses for low-income workers, concerns were raised regarding the ban enabling large corporations to hire-away from small competitors and start-ups, as well as the potential for employees to steal company information, intellectual property or entice clients or colleagues away from organisations.
These reforms are expected to take effect from 2027 and will operate prospectively.[xiv]
Disclaimer: This article is not intended to be a substitute for obtaining legal advice.
© Stephens Lawyers & Consultants. 3 December, 2025; Authored by Katarina Klaric, Principal, Stephens Lawyers & Consultants.
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Katarina Klaric
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[i] Joint Media Release. Ministers’ Media Centre, Minister of Employment and Workplace Relations Portfolio. “Cracking down on-non complete clauses to boost wages and productivity” – 25 March 2025. Australian Government – The Treasury, Consultation Paper titled ‘Reform to non-compete clauses and other restraints on workers”, 25 July, 2025 – https://storage.googleapis.com/files-au-treasury/treasury/p/prj36c1e11111f60b0fc8884/page/c2025_681950_cp.pdf .
[ii] Christopher Arup, Chris Dent, John Howe and Wiliam Van Caenegem, Restraints of Trade: The Legal Practice 2013, UNSW Law Journal, Volume 36 (no.1) 1-14
[iii] Care Legion Pty Ltd v Addo [2025] VCC 634 (25 May 2025),[327]
[iv] [2008] NSWSC 852 at [47]
[v] Ibid [332]
[vi] Ibid, [329],[333],[336] and [432]
[vii] Ibid. [350]
[viii] Ibid [12], [395]
[ix] Ibid [358], [382] and [399]
[x] Ibid [298], [356] and [357]
[xi] Ibid, [397] and [400]
[xii] Australian Government – The Treasury, Consultation Paper titled ‘Reform to non-compete clauses and other restraints on workers”, 25 July, 2025 at Page 1
[xiii] Ibid.
[xiv] Joint Media Release. Ministers’ Media Centre, Minister of Employment and Workplace Relations Portfolio. “Cracking down on-non complete clauses to boost wages and productivity” – 25 March 2025