When Can’t I Enforce a Non-compete Clause?

Table of Contents

Share at:

Considering inserting a non-compete clause in your next contract? Worried that you won’t be able to enforce it? It is important that your non-compete clause is effective otherwise the protection you could have gained because of it, becomes void. Read on to learn when your non-compete clause will be unenforceable.

What Is a Non-compete Clause?

A non-compete clause is a clause that is inserted into employment contracts. Fundamentally, a non-compete clause acts as a restriction on certain activities after the conclusion of employment. A non-compete clause will restrict your employee directly competing against your business within a specific geographic scope for a period of time after they cease their employment with you. They can also act to protect confidential information about your business. Furthermore, they can prevent your former employees from taking your client to their new employment or business. You are required to have a legitimate business purpose or reason to utilise a non-compete clause.

What Determines When I Can’t Enforce a Non-compete Clause?

Fundamentally, you are required to have a legitimate business purpose to enforce a non-compete clause. Moreover, this must be demonstrable business interest as there is a general public policy interest in not restricting people’s future employment. Basically, given the circumstances, they have to be considered ‘reasonable.’

Chiefly, you will not be able to enforce a non-compete clause if it is not proportional to the business interest you are trying to protect. The court will consider the nature of your business interest and whether there are alternative measures that can achieve the same purpose but are not as restrictive upon your former employees. Non-compete clauses will not be effective if they cover an unreasonably wide area, for example preventing your former employee working anywhere else in the world in the same industry. Furthermore, they will not be enforceable if they are too long-lasting. Also, they will not be effective if their only purpose is to prevent someone from working. Moreover, a non-compete clause will not be effective if there is insufficient consideration from your employee in signing the agreement.

What Can the Court Do About an Unenforceable Non-compete Clause?

If the court deems your non-compete clause unenforceable then they have several options in response to it. Firstly, they could void the clause completely, meaning it is unenforceable in its entirety. Alternatively, they could vary it to make it more reasonable. For example, reducing the clause from twelve months to six months. Fundamentally, it will depend on your circumstances to determine how the court will respond to an unreasonable clause.

Conclusion  

Therefore, make sure your non-compete clauses are reasonable to ensure that they are enforceable. Ensure you get the maximum protection possible by these clauses by making them reasonable and serving a legitimate business purpose. Furthermore, get in touch with an employment lawyer for assistance in creating one and ensure you can get advice relevant to your circumstances.

Find the perfect lawyer to help your business today!

Get a fixed-fee quote from Australia's largest lawyer marketplace.

Share at:

Simplify creating legal documents today

Browse through Lawpath's AI tools which can be used to draft, review and refine legal documents today!

Related Articles

Do You need an ABN to Sell on Facebook? (2026 Update)

Looking to sell your products or second-hand items on Facebook? Find out whether you need an ABN to sell on Facebook here.

What is a Patent? (2026 Update)

A patent is a form of legal protection which grants you exclusive commercial rights to your invention. Find out more here.

How To Write A Business Plan (2026 Update)

A business plan gives your venture direction from the outset. Read this guide to find out how you write a business plan.

A Guide to Using Employment Agreements (2026 Update)

Employment agreements let you set out the terms of employment particular to the role you're hiring for. Find out how to use them here.

7 Critical Things To Know About Importing Goods From Overseas in Australia (2026 Update)

Are you thinking about importing goods from overseas? Read this article to find the legal requirements you need to know.

3 Reasons to Get a Registered Virtual Office Address (2026 Update)

Having a virtual office address for your company not only protects your privacy, but can also make your company more efficient. Read more here.