Restraint of Trade Clauses in Queensland: What Employers and Employees Must Know Before the 2027 Non-Compete Ban

What Is a Restraint of Trade Clause?

A restraint of trade clause is a contractual provision that restricts what a person can do during or after a business or employment relationship. In Queensland, restraint clauses appear in two main contexts:

• Employment contracts, restricting former employees from competing, soliciting clients or staff, or working for competitors
• Business sale agreements, restricting a vendor from setting up in direct competition with the business they sold

Under Australian common law, a restraint of trade clause is presumed void. The party seeking to enforce the clause, almost always the employer or buyer, carries the burden of proving the restraint is reasonable in the circumstances and goes no further than reasonably necessary to protect a legitimate business interest: Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535; applied consistently in Australian courts including Peters (WA) Ltd v Bhatt (2003) 136 IR 1.

The Four Factors Queensland Courts Assess

Queensland courts assess the reasonableness of a restraint by reference to four primary factors:

1. Duration

Restraints of 6 to 12 months are commonly upheld for senior employees. Restraints extending to 2 or 3 years are more likely to be challenged, and must be justified by the specific nature of the employee’s client relationships and access to confidential information. In business sale contexts, longer restraints (3–5 years) are routinely upheld because the vendor has received consideration for the goodwill being protected.

2. Geographic Scope

A restraint must be limited to the area in which the employer actually operates and in which the employee had meaningful client contact. A Queensland-wide or Australia-wide restraint for a Brisbane-based employee who only dealt with local clients will almost certainly fail. Courts assess the geographic footprint of the legitimate business interest, not the employer’s ambitions.

3. Activities Restrained

Restraint clauses must identify the restricted activities with sufficient precision. Broad prohibitions on engaging in any “similar business” are vulnerable to challenge. Courts look for specificity: soliciting named clients, approaching identified staff, or working in a defined role for a direct competitor. Generic restraints against “working in the industry” are frequently struck down.

4. The Employee’s Role and Access to Confidential Information

The more senior the employee, and the greater their access to client relationships, pricing, trade secrets, and confidential data, the more latitude courts give to restraint clauses. A restraint for a junior administrative employee with no client contact will be assessed very differently from a restraint for a partner or senior sales executive who built client relationships over a decade.

Queensland’s Position: No Blue-Pencilling

A critical distinction for Queensland employers: unlike some other states, Queensland courts generally do not blue-pencil (sever) an overreaching clause to make it enforceable. If a restraint clause fails the reasonableness test, it is void in its entirety. This makes careful drafting essential, a clause that is even slightly too broad may be completely unenforceable.

Cascading clauses, where the contract contains multiple provisions covering different geographic areas, durations, and activity types in a hierarchy, are the standard industry response. A cascading clause allows the court to enforce the most limited version that is still reasonable, rather than being left with nothing enforceable at all.

Restraint of Trade in Business Sales

Restraint clauses in business sale agreements are assessed differently. When a business is sold, the vendor is compensated for the goodwill of the business. A restraint in this context is generally considered more legitimate, the purchaser has paid for something they would not receive full value from if the vendor could immediately set up in competition and take back customers.

Courts routinely uphold restraints of 3 to 5 years in business sale contexts, particularly where the sale price reflects client relationships, a trade name, or customer goodwill. Questions about restraint clauses in shareholder or director arrangements are also addressed by our director disputes lawyers. The restraint must still be proportionate to the actual business sold, a clause restraining a vendor from conducting any business anywhere in Australia when they sold a small Brisbane-based trade services business would still be excessive.

Enforcing a Restraint: Injunctive Relief Is the Only Real Remedy

If a former employee breaches a restraint of trade clause, damages are rarely a practical remedy. The employer’s difficulty is proving the quantum of loss with precision, which clients left because of the breach, what revenue was affected, and over what period. By the time a damages claim is resolved, the damage is done.

The appropriate remedy is urgent injunctive relief, an application to the Queensland Supreme Court (or Federal Court) for an order restraining the employee from continuing to breach the clause. Our commercial litigation team regularly handles urgent restraint of trade injunction applications in Queensland. The test is the ABC v O’Neill (2006) 227 CLR 57 two-stage test:

1. Serious question to be tried, does the employer have a reasonably arguable case that the restraint is valid and has been breached?
2. Balance of convenience, would damages be an adequate remedy for the harm if no injunction is granted? (In most restraint cases, the answer is no, client relationships lost to a competitor cannot easily be valued or restored.)

Injunction applications must be made as a matter of urgency. An employer who delays for weeks after learning of a breach risks the court refusing injunctive relief on the basis that the delay demonstrates the harm is not, in fact, irreparable. The practical rule: if you become aware of a breach, call a lawyer the same day.

The Approaching Non-Compete Ban: What Queensland Businesses Must Know

In the 2025–26 Federal Budget, the Australian Government announced a significant reform: a statutory ban on non-compete clauses for employees earning below the Fair Work Act high-income threshold. For 2026–27, that threshold is $190,100 per annum. Following Treasury consultation, legislation is expected to be introduced in 2026 and take effect from 2027.

The key features of the proposed ban:

• Who it covers: Employees earning below $190,100 per year (indexed annually on 1 July). This captures the large majority of Australian workers.
• What is banned: Non-compete clauses (clauses that prevent a former employee from working for a competitor or starting a competing business).
• What remains enforceable: Non-solicitation clauses (preventing poaching of clients and staff) are not covered by the ban, though the Government is consulting on whether to extend reforms to these. Common law duties of confidentiality, fidelity during employment, and fiduciary obligations remain unaffected.
• Business sales are excluded: Restraint clauses in business sale agreements are not captured, only employment contracts.
• High-income workers: The ban does not apply to employees above the threshold. However, Treasury is also consulting separately on reforms to non-competes for high-income workers.
• Prospective operation: The ban will apply to clauses entered into after commencement. Existing contracts will have a transitional grace period.

For Queensland employers with restraint clauses in existing employment contracts, the practical implication is immediate: review your contracts now. If your business relies on non-compete clauses to protect client relationships and confidential information for employees earning under $190,100, you need a strategy before 2027. That strategy may include strengthening non-solicitation and confidentiality provisions, restructuring roles and remuneration, or formalising information security policies.

What Employees Should Know

If you have received a cease-and-desist letter from a former employer claiming you are in breach of a restraint of trade clause, do not ignore it. The consequences of non-compliance with an injunction are serious, including contempt of court proceedings.

However, many restraint clauses that employers attempt to enforce are in fact unenforceable. A clause may be void if:

• The duration is excessive relative to your role and the nature of your client relationships
• The geographic scope is broader than the area in which you actually operated
• The activities restrained are too wide and not properly connected to a legitimate business interest
• The clause was not properly incorporated into your contract of employment
• The employer’s conduct (such as constructive dismissal, repudiation, or breach of contract) disentitles them from enforcing the restraint

If you receive a demand letter or learn that an injunction application is being prepared, seek legal advice immediately. An interlocutory injunction can be obtained in days, often without prior notice to you (ex parte), and once granted, is difficult and expensive to discharge.

5 Practical Steps for Queensland Employers Before 2027

1. Audit your restraint clauses, identify which employees are covered, what activities are restrained, and whether the clauses are likely to be enforceable given the employee’s role and access to client relationships.
2. Implement cascading clauses, replace any simple, single-period/single-geographic restraints with cascading provisions that give courts maximum flexibility to enforce the most limited operative version.
3. Strengthen complementary protections, non-solicitation clauses (for clients and staff), confidentiality agreements, and information security policies will become more important as the non-compete ban approaches.
4. Review business sale restraints, if you are purchasing a business, ensure your vendor restraint is properly documented, appropriately scoped, and capable of enforcement.
5. Act immediately on any breach, delay in enforcing a restraint materially prejudices your prospects of obtaining injunctive relief. If you become aware of a breach, contact a lawyer the same day.

Frequently Asked Questions

This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.