What to Look For in Non-Compete Clauses When Determining Enforceability in Perth

There is a widespread belief among Australian workers and business owners that non-compete clauses are not worth the paper they are written on. There is an equally widespread belief among employers that a signed restraint is a binding guarantee. Both positions are wrong, and the gap between them causes a considerable amount of avoidable conflict.

The reality sits in between, and it is more interesting than either extreme. Under Western Australian law, a non-compete clause starts from a position of being void. It only becomes enforceable if the party seeking to rely on it can demonstrate that it goes no further than reasonably necessary to protect a legitimate business interest. Some clauses clear that bar comfortably. Many do not. And in Western Australia specifically, there is a further wrinkle that makes badly drafted restraints considerably more fragile here than in some other states.

This guide explains how enforceability is actually assessed, what factors carry weight, where employers routinely overreach, and what both sides should be looking at when a restraint becomes live. It is general information rather than advice on your particular situation, and the difference matters, because these matters turn heavily on their specific facts.

The Starting Point Under Western Australian Law

The doctrine that governs this area is called restraint of trade, and it is considerably older than modern employment law. The underlying principle is that people should be free to earn a living and use their skills, and that agreements limiting that freedom are contrary to public policy.

From that starting point, the courts developed a workable compromise. A restraint is presumptively void, but it can be saved if the party relying on it proves the restraint is reasonable, both as between the parties and in the public interest. If you want the historical background on how the doctrine developed across common law jurisdictions, the Wikipedia entry on restraint of trade gives useful general context.

Three points flow from this that are worth understanding clearly.

The burden sits with the employer. It is not for the departing employee to prove the clause is unreasonable. It is for the party seeking to enforce it to prove that it is reasonable. That is a meaningful practical difference when a dispute reaches a courtroom.

Reasonableness is assessed at the time the contract was made. Not at the time of the breach, and not with hindsight about what the employee actually did afterwards. A clause that was too broad when it was signed does not become reasonable because the employee later behaved badly.

The clause must protect an interest, not merely suppress competition. This is the point employers most often miss. An employer has no legitimate interest in preventing a former employee from competing simply because competition is inconvenient.

Why Western Australia Differs From Some Other States

This is the detail that catches out businesses using contract templates drafted elsewhere, and it genuinely matters.

New South Wales has legislation, the Restraints of Trade Act 1976, which gives courts a power to read down an overly broad restraint and enforce it to the extent it is reasonable. Western Australia has no equivalent statute. Here, the common law applies in its unmodified form.

The practical consequence is significant. A WA court cannot rewrite an unreasonable restraint into a reasonable one. The most it can do is apply what is known as the blue pencil test, striking out severable words where the clause has been drafted so that removing them leaves a grammatically complete and coherent obligation behind. If the restraint is a single unified provision that goes too far, it fails entirely.

This is why cascading or ladder restraints are so common in Australian contracts. Rather than one clause saying twelve months across Western Australia, a properly drafted restraint sets out a series of alternatives: twelve months, or nine months, or six months, or three months, combined with a descending series of geographic areas. Each combination is expressed as a separate severable obligation. If the widest version is found unreasonable, the court can strike it out and consider the next one down.

A restraint drafted as a single broad prohibition, with no cascading structure, is far more vulnerable in Western Australia than the same clause would be in Sydney. If you have taken a template from an interstate source, this is the first thing to check.

What Counts as a Legitimate Business Interest

No legitimate interest means no enforceable restraint, regardless of how carefully the clause was drafted. Courts have recognised a limited set of interests.

Confidential Information and Trade Secrets

Genuine confidential information qualifies. Pricing structures, methodologies, formulations, supplier terms, strategic plans, technical processes and proprietary systems can all support a restraint if the employee had real access to them.

What does not qualify is the general skill, knowledge and experience an employee accumulates through doing their job. That belongs to the employee. The line between proprietary information and acquired expertise is frequently the central battleground in these disputes, and it is not always obvious where it sits.

Businesses relying on this interest should note that confidentiality obligations and non-compete restraints are different tools doing different jobs. Well-drafted confidentiality provisions and non-disclosure agreements protect information directly and are generally easier to enforce than a blanket prohibition on working in the industry. This is particularly relevant for technology businesses, where the value often sits in information and code rather than in customer lists.

Customer Connections and Client Relationships

Where an employee has been the face of the business to particular clients, the employer has a legitimate interest in a period of protection while those relationships are transferred to someone else.

The strength of this interest depends on the actual relationship. A senior account manager who has been the sole contact for major clients over several years presents a genuine risk. A back office employee with no client contact does not, and a restraint imposed on that person is unlikely to survive scrutiny.

Workforce Stability

Preventing a departing employee from stripping the team on their way out is a recognised interest, usually protected through a non-solicitation of employees clause rather than a full non-compete.

What Does Not Qualify

Preventing ordinary competition. Punishing an employee for leaving. Protecting against the general risk that a good employee will be good somewhere else. Restricting someone from using skills they brought with them or developed generally. None of these will support a restraint.

A Perth legal advisor discussing non-compete clause enforceability factors with an employee.

What to Look For in Non-Compete Clauses When Determining Enforceability in Perth Contracts

Once a legitimate interest exists, attention turns to whether the restraint goes further than necessary to protect it. Four dimensions matter.

Duration

There is no fixed rule, and anyone offering one is oversimplifying. The relevant question is how long the protected interest genuinely needs shielding.

For customer connections, the practical test is how long it reasonably takes for a replacement to build relationships with those clients. In many industries that is a matter of months rather than years. For confidential information, the question is how long the information retains commercial value, which in fast-moving sectors can be very short.

As a broad observation, shorter restraints of three to six months are commonly upheld where a genuine interest exists. Twelve months requires real justification. Anything beyond that, in an ordinary employment context, faces a steep climb.

Geographic Area

The restrained area should correspond to where the employee actually operated and where the protected interest exists.

A restraint covering the Perth metropolitan area may be reasonable for someone who serviced clients across the city. The same restraint applied to an employee who only ever worked in the south-eastern suburbs is likely too wide. A restraint covering all of Australia, imposed on someone whose entire client base sat within a thirty kilometre radius, is very difficult to defend.

Some modern restraints define the area by reference to clients rather than geography, prohibiting dealings with specific clients the employee actually serviced rather than drawing a circle on a map. Where a business operates nationally or online, this approach is often both more defensible and more useful.

Scope of Restricted Activity

The clause should restrain what the employee actually did, not everything the employer does.

A restraint preventing a specialist engineer from performing that engineering discipline for a competitor may be reasonable. A restraint preventing that same person from being employed in any capacity by any business that competes in any part of the employer’s operations is almost certainly not. Clauses that would prevent someone from working as a receptionist at a competitor because they previously worked there as a technician demonstrate the problem clearly.

Consideration and Bargaining Position

Restraints given at the outset of employment are supported by the employment itself. Restraints introduced mid-employment raise the question of what the employee received in exchange. A promotion, a pay rise or a genuine benefit can supply that consideration. A demand to sign a new contract with no accompanying benefit is on weaker ground.

Courts also consider the relative bargaining positions. A restraint negotiated between a senior executive with legal advice and a well-resourced employer carries more weight than one presented to a junior employee on a take it or leave it basis.

Businesses reviewing their contracts should treat restraints as one component of a broader document rather than a standalone protection, since the clauses in a service or employment agreement operate together.

Post-Employment Restraints Versus Sale of Business Restraints

This distinction is fundamental and frequently misunderstood.

Courts apply restraint of trade principles far more generously where the restraint forms part of a business sale. The reasoning is sound. A purchaser paying for goodwill is entitled to protection against the vendor immediately setting up next door and taking that goodwill back. The vendor has received substantial consideration, the parties usually negotiated at arm’s length with advice, and there is no meaningful power imbalance.

The result is that restraints of three to five years, sometimes longer, are regularly upheld in sale of business contexts where an equivalent employment restraint would fail immediately.

This matters practically because the same person can be subject to both. A business owner who sells and stays on as an employee may have a lengthy restraint tied to the sale and a shorter one tied to the employment, and which applies to which conduct is a question that needs answering before anyone acts. Anyone approaching a transaction should understand what is involved before selling a business and the legal steps in business sales and purchases, since restraint terms are usually negotiated alongside price rather than after it.

It is also worth noting that the federal reform discussed below is not proposed to extend to restraints connected with the sale of a business.

Reform on the Horizon

The Federal Government announced in the 2025 to 2026 Budget an intention to ban non-compete clauses for workers earning below the Fair Work Act high income threshold, with the change to be implemented through amendments to the Fair Work Act and to take effect from 2027.

As matters stand, this remains an announced policy rather than enacted law. Consultation has taken place, but legislation had not passed at the time of writing. The announced position is that the ban would operate prospectively, would not extend to restraints associated with the sale of a business, and would be accompanied by measures addressing no-poach and wage-fixing arrangements. Treasury has also consulted on whether and how non-solicitation clauses and restraints on higher earning workers should be treated.

Two practical implications follow. Employers who currently rely on non-compete clauses for staff below the threshold should be reviewing their contracts now and considering whether properly drafted confidentiality and non-solicitation provisions can do the protective work instead. Employees should not assume that a restraint is already unenforceable, because the current common law position continues to apply until legislation commences.

Because this area is actively developing, anyone relying on it should check the current position rather than working from an article, including this one.

How These Disputes Actually Play Out

Understanding the practical dynamics is as useful as understanding the legal test.

The letter of demand. Most disputes begin with correspondence asserting the restraint and demanding undertakings. Many end there, sometimes because the restraint is sound and sometimes because the recipient does not realise they could challenge it.

Interlocutory injunctions. An employer seeking to enforce urgently applies for an interim injunction. The court considers whether there is a serious question to be tried and where the balance of convenience lies. These applications move quickly, which means the practical outcome is often determined long before any full hearing.

Cost and commercial reality. Litigation is expensive for both sides. Many restraint disputes settle on negotiated terms, commonly a reduced restraint period, an agreement not to approach specified clients, or an undertaking about confidential information. Understanding that the realistic outcome is usually negotiated rather than adjudicated changes how both parties should approach it.

Damages. Where breach is established, damages can be awarded, though proving loss attributable to the breach is frequently difficult. Employers should not assume a successful enforcement action produces a substantial payment.

The general principles around enforcing a contractual breach in Western Australia apply here as they do to other contractual obligations.

Practical Guidance for Employers

If you are drafting or reviewing restraints, several points make a real difference.

Draft for the role, not the organisation. Standard restraints applied uniformly across all staff are the most common failure. The senior salesperson and the warehouse coordinator do not need the same clause, and applying the same clause to both weakens it for everyone.

Use a cascading structure. Given that WA courts cannot read down an unreasonable restraint, a properly cascaded clause is not a drafting nicety. It is the difference between partial enforcement and complete failure.

Be realistic about duration and area. A twelve month national restraint that fails entirely protects nothing. A six month restraint limited to the metropolitan area that holds up protects something real.

Layer your protections. Confidentiality, non-solicitation of clients, non-solicitation of employees and non-compete are four distinct tools. The narrower ones are easier to enforce and frequently achieve the commercial objective without the enforcement risk.

Review contracts when circumstances change. A restraint drafted for someone’s original junior role does not automatically suit them three promotions later.

Consider garden leave. Keeping an employee on the payroll through their notice period, away from clients and systems, achieves protection without relying on a post-employment restraint at all.

These considerations sit alongside the broader commercial legal risks facing growing businesses, and are worth addressing as part of a periodic contract review rather than only when someone resigns.

Practical Guidance for Employees

If a restraint has become live for you, several steps are worth taking before you do anything.

Read the actual clause. Not your memory of it. Obtain the executed contract and any variations. People are frequently surprised by what their restraint does and does not say.

Identify what the employer is genuinely protecting. Did you hold confidential information? Were you the primary contact for clients? If the honest answer is no, the restraint faces difficulty.

Check the duration, area and scope against your actual role. Overreach on any of these dimensions is the most common weakness.

Do not take confidential material with you. This is separate from the restraint and generally much easier for an employer to establish. Client lists, pricing documents, files and data should stay where they are.

Get advice before you act, not after. Once you have started at a competitor or approached former clients, your options narrow considerably. Advice beforehand is worth several times what it costs afterwards.

Do not assume it is unenforceable. The belief that restraints never hold up in Australia is wrong often enough to be dangerous.

If you are in the south-eastern suburbs and dealing with a restraint issue, having a conversation locally before making a decision is usually the sensible first step. Are you looking for a lawyer in Armadale who can review your contract and explain where you stand? If so, click here.

Frequently Asked Questions

Are non-compete clauses enforceable in Western Australia?

They can be, though they begin from a position of being void and only become enforceable if the employer proves the restraint goes no further than reasonably necessary to protect a legitimate business interest. Unlike New South Wales, Western Australia has no statute allowing courts to read down an overly broad restraint, so a clause that overreaches and is not drafted in severable form is likely to fail entirely rather than be narrowed.

How long can a non-compete clause last?

There is no fixed limit. The question is how long the protected interest genuinely requires protection. In employment contexts, restraints of three to six months are more readily upheld, twelve months requires clear justification, and longer periods are difficult to sustain. Restraints attached to the sale of a business are treated far more generously, and periods of several years are regularly enforced where goodwill has been purchased.

Can my employer stop me working for a competitor at all?

Only within the limits of an enforceable restraint. An employer has no legitimate interest in preventing competition as such, only in protecting confidential information, client connections and workforce stability. A clause preventing you from working in any capacity for any competitor anywhere is likely to be far wider than necessary, though whether it fails depends on your role, the drafting and the specific circumstances.

What happens if I breach a non-compete clause?

The employer may seek an injunction restraining you from continuing, and may claim damages for loss caused by the breach. Injunction applications move quickly, which is why advice before acting matters so much. In practice, many disputes resolve through negotiated undertakings rather than proceeding to a full hearing, given the cost and uncertainty involved for both parties.

Will the proposed federal ban make my non-compete void?

Not yet. The Government announced an intention to ban non-compete clauses for workers earning below the Fair Work Act high income threshold, to take effect from 2027, but legislation had not passed at the time of writing and the announced approach is prospective. The existing common law position continues to apply in the meantime, so a current restraint should not be treated as automatically unenforceable. Given how quickly this area is moving, check the current position before relying on it.

Bringing It Together

Non-compete clauses in Western Australia occupy a middle ground that neither side tends to appreciate. They are not automatically void, and they are not automatically binding. Enforceability turns on whether a genuine business interest exists and whether the restraint is tailored to protecting it, assessed as at the date the contract was signed.

For employers, the lesson is that narrower clauses are stronger clauses, and that in a state without read-down legislation, a carefully cascaded restraint is essential rather than optional. For employees, the lesson is that a restraint should be assessed rather than either feared or dismissed, and that the assessment is worth obtaining before you act rather than after.

This article provides general information only and does not constitute legal advice. Restraint disputes turn heavily on their particular facts, and anyone facing one should obtain advice specific to their situation.