Australia: Levelling the playing field: the enforceability of non-compete restraints of trade for employees

Last Updated: 21 April 2012
Article by Ben Keenan and Nerida Jessup

Most Read Contributor in Australia, September 2016

The contrasting outcomes of two recent decisions in the Federal Court of Australia and the Supreme Court of Victoria demonstrate the importance of ensuring that restraint of trade clauses within employment contracts are carefully drafted.

HRX Holdings Pty Ltd v Pearson

In the first decision, of HRX Holdings Pty Ltd v Pearson (2012) FCA 161 (HRX's Case), the Federal Court upheld a two year restraint against a former employee.

The employer, HRX Holdings Pty Ltd (HRX), a human resources outsourcing company, sought to enforce a restraint against its former director, Mr Brent Pearson, restraining him from operating, or becoming concerned or interested in, a human resource outsourcing or consulting business for a period of two years from the date Mr Pearson ceased to be employed by HRX Holdings Pty Ltd (HRX).

Prior to executing the restraint Mr Pearson had obtained legal advice that a two year restraint of trade would be unenforceable at law. After more than seven years' service with HRX, Mr Pearson resigned in order to join a direct competitor.


The Court noted that Mr Pearson had played a pivotal role in developing the business, creating pricing structures and business models. He generated or had access to almost all of HRX's confidential information and intellectual property and shared a close working relationship with the company's client base.

The Federal Court found that the restraint was reasonable in the circumstances and enforceable, placing particular emphasis on the following factors:

  • Mr Pearson's intimate knowledge of and involvement with HRX's industry contacts, clients, business models and pricing structures;
  • The protracted nature of the negotiations for the restraint clause itself, during which time Mr Pearson received legal advice regarding the enforceability of the proposed restraint;
  • The fact that Mr Pearson would continue to receive remuneration for all but three months of the two year term via a share issue and sale arrangement built into the restraint; and
  • The two year term accommodated the renewal cycle for the majority of HRX's clients, allowing the company an opportunity to secure its existing client base without competition from Mr Pearson.

Wallis Nominees (Computing) Pty Ltd v Pickett

Facts of Case

In contrast, the Victorian Supreme Court held that a 12 month restraint of trade was not enforceable.

The case of Wallis Nominees (Computing) Pty Ltd v Pickett (2012) VSC 82 (Pickett's Case) involved an attempt by a software consultancy business to enforce a 12 month restraint against a former employee, Mr Matthew Pickett, providing services to any client of Wallis Nominees (Computing) Pty Ltd (Wallis Nominees) to whom Mr Pickett had provided specific services, or had contact with whilst employed by Wallis Nominees.

Mr Pickett was contracted out to various clients during more than four years' service with Wallis Nominees. In January 2011, Mr Pickett was placed with Grocon Pty Ltd (Grocon) to act in a supporting role to Grocon's then IT Manager. When Grocon underwent a restructure in November 2011, Mr Pickett was offered and accepted the revised IT Manager's position with Grocon. Upon his resignation from Wallis Nominees to take up employment with Grocon, Mr Pickett was informed that he would be in breach of his employment contract.

The Victorian Supreme Court held that Mr Pickett's skills and experience did not constitute a legitimate business interest capable of protection under a restraint. Sifris J commented:

"As the cases show, something more than exposure to or interaction with the customer or client by the employee is required. Even a close connection with or persuasive manner with the customer or client may not be sufficient. A strong connection is required. This would include personal or special knowledge (which may include confidential information) of the client and a significant degree of influence."

His Honour also found, notwithstanding that there was no legitimate interest to protect, the restraint in any case provided greater protection than was necessary as it not only prevented the employee from providing services to clients of the employer that he had been in actual contact with, but also in respect of which there had been no contact.


When drafting restraints of trade employers should consider the specific business interests that require protection and should consider using the following strategies:

  1. Offering some form of remuneration to the employee in exchange for the restraint, especially if the restraint is for an extended period;
  2. If client contracts are customarily fixed term (e.g. 12 – 24 months), tailoring the term of any non-competition restraint to this cycle; and
  3. Ensuring that the actions which the restraint prohibits are targeted and relevant to the business interest which the employer seeks to protect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Nerida Jessup
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.