Your senior account manager resigns. Within days, a longstanding client receives a proposal from their new employer. Another customer mentions that the former employee knows exactly when its contract renews, and what price would persuade it to move.

The employment agreement contains a restraint clause. You want the approaches stopped immediately.

Before threatening proceedings, identify the obligation being breached. Is the employee soliciting clients covered by a valid restriction? Does the agreement also prohibit accepting their business? Has confidential pricing or a customer database been used?

A client's departure is the starting point for an investigation. The legal claim depends on how the business was won. This article explains what an employer can realistically stop under Australian law, with particular attention to restraints in New South Wales.

01 When competition becomes a legal issue

Former employees are generally free to compete once employment ends, unless an enforceable obligation restricts what they do. A business cannot assume that every customer relationship belongs to it indefinitely.

Timing matters. Preparing for a new role, diverting an opportunity while still employed and competing after departure raise different questions. Conduct during a notice period should be assessed against the continuing employment relationship and the contract, including any garden leave arrangements.

Build the chronology around specific acts. When was the proposal prepared? Who supplied the pricing? When did the client first receive an approach? A resignation date alone may not show when the relevant activity began.

Also identify the outcome you need. Preventing use of a copied database, stopping approaches to defined clients and preventing employment with a competitor are different forms of protection. The evidence may justify one without supporting all three.

02 Solicitation and dealing are different restrictions

Read the operative words rather than relying on a heading such as "restraint of trade".

  • Non-solicitation generally targets seeking or encouraging business from specified clients. The communication and surrounding conduct matter.
  • Non-dealing can extend to accepting or conducting business with specified clients, even where the client made the first contact, subject to the wording and enforceability.
  • Non-compete restricts working for, or being involved in, a competing business within a defined scope.
  • Confidentiality addresses information and its use or disclosure. It can operate independently of any client restraint.

"The client contacted me first" therefore does not resolve every dispute. Equally, an ordinary announcement of a new role should not automatically be treated as prohibited solicitation.

Keep the actual message, the recipient list and any earlier communications. A public LinkedIn update, a targeted message offering to beat your price and an arrangement made before departure call for different assessments. Indirect approaches through colleagues or the new employer also need to be compared with the clause.

03 Is the client restraint enforceable?

A signed agreement does not settle enforceability. A restraint must protect a legitimate business interest and go no further than is reasonably necessary to protect it. Preventing ordinary competition is not enough. Reasonableness is generally assessed at the time the restraint was agreed.

The assessment should connect the restriction to the role: which customers the employee influenced, what information they accessed, how long its commercial value lasts and why the duration and scope are needed. A standard six or twelve month clause is not automatically reasonable. A restriction covering customers the employee never dealt with may need different justification from one confined to relationships they managed.

In NSW, section 4 of the Restraints of Trade Act 1976 provides that a restraint is valid to the extent it is not against public policy, whether or not it is expressed in severable terms. A court may therefore enforce an excessive restraint in part. That is not guaranteed: a court can decline to read down a clause, particularly where it reflects a manifest failure to make a genuine attempt to protect a legitimate interest. Other states and territories require their own analysis.

In Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267, the NSW Court of Appeal dismissed an insurance broker's appeal against client restraints operating for twelve months. The Court examined the customer connections and the evidence supporting that period, and recognised the separate function of a prohibition on dealing as well as soliciting. The decision does not create any general entitlement to a twelve month restraint.

Review variations, promotions, the governing law and the circumstances of termination before asserting that a particular restriction survives and can be enforced.

04 What counts as confidential information

A client's name on a public website differs from an internal record of margins, negotiated pricing, renewal dates and upcoming purchasing requirements. Identify the particular information and explain why it deserves protection.

Confidentiality obligations can arise under contract and in equity, but their scope needs careful assessment. In Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172, the NSW Court of Appeal examined the distinction between protected information and an employee's general skill and know-how. Whether the information could be separated from that know-how was important. An employer's wish to keep something secret does not, on its own, determine the result.

For a suspected CRM export, record which fields were included, who could access them, the controls applied and the evidence of copying or later use. Labelling a whole database "confidential" leaves those questions unanswered.

Section 183 of the Corporations Act 2001 (Cth) also prohibits a person who obtains information because they are, or have been, an officer or employee of a corporation from improperly using it to gain an advantage for themselves or someone else, or to cause detriment to the corporation. The duty continues after employment ends. It requires proof of its statutory elements and is not a general ban on competition.

An absent or disputed restraint therefore does not end the inquiry about information. Equally, remembering a customer does not prove misuse.

05 Preserve the evidence before making demands

Preserve relevant records promptly, with IT or forensic assistance where appropriate. Routine mailbox deletion, device reallocation or log expiry can remove the material needed to show what happened.

  • Employment records. The signed agreement, variations, role description, resignation correspondence and exit instructions.
  • System records. CRM access and export logs, file transfers and relevant business email.
  • Client communications. Original messages, proposals and attachments, including dates and available metadata.
  • Commercial impact. Evidence identifying the affected clients, the employee's involvement and the work or revenue at risk.

Keep contemporaneous notes of what customers report, separating their actual words from internal assumptions. Preserve complete communications rather than selected screenshots.

Collection must be lawful and properly scoped. Knowing an old password does not give authority to access a personal account. Obtain advice before searching personal devices or accounts, or undertaking workplace surveillance.

If you want information returned or deleted, preserve the evidence first. A protocol can provide for secure copies, restricted access and verified return or deletion without destroying material relevant to anticipated proceedings.

Use the evidence to test the allegation. A download may warrant investigation without proving it was used to solicit clients. A lost customer may have moved for reasons unrelated to any breach.

06 When an urgent injunction may help

Where an actionable breach is threatened or continuing, an employer may seek an interlocutory injunction: an order providing protection until the dispute is finally decided.

The general principles explained in Australian Broadcasting Corporation v O'Neill [2006] HCA 46 require a sufficient likelihood of success to justify interim protection, and consideration of the balance of convenience. The strength of case required depends on the nature of the rights asserted and the practical consequences of the order. Whether damages would adequately compensate the harm is also relevant. O'Neill was a defamation case, so its principles must be applied to the facts of an employment dispute.

Prepare a precise case: the obligation relied on, the conduct, the clients or information affected and why the proposed order is necessary. Delay, hardship and the time left to run on the restraint can all affect the application. Interim relief does not finally establish enforceability.

The usual undertaking as to damages also needs attention. It can expose the employer to an order to compensate the employee or others for loss caused by the injunction if it later proves unjustified. The court's rules and the employer's ability to meet the undertaking should be assessed before applying.

Focused correspondence may secure protection without an application. Undertakings can address specified approaches, use of information, and preservation and return of records. Their scope should match the conduct and the legal rights involved, rather than demand an unnecessarily broad prohibition on working.

07 Claims against the new employer and financial recovery

Hiring someone from a competitor does not automatically make the new employer liable. Its own conduct and knowledge need examination.

The consequences can be substantial where participation in wrongdoing is proved. In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43, two senior employees used confidential material in a plan to move business to a competitor. Foresters knowingly assisted their breaches of fiduciary duty. The High Court ordered it to account for profits of approximately $14.8 million.

That remedy concerned the gain attributable to the wrongdoing, not an automatic award for every customer lost. The case involved serious proven misconduct and does not establish liability merely because clients follow a departing employee. Nor does every employee owe the same fiduciary obligations.

For your business, identify the available cause of action and the remedy it supports. Evidence of lost work, margins, customer decisions and mitigation will help assess any damages claim. A claim against the competitor must have its own foundation.

08 What the proposed non-compete reforms mean

On 7 September 2026, the Australian Government released an exposure draft of legislation to ban non-compete clauses for employees earning below the Fair Work Act high income threshold, currently $190,100. Consultation closed on 2 October 2026, and the Government has indicated an intended 2027 start, subject to the legislation passing Parliament.

The draft also deals with co-worker non-solicitation clauses, no-poach and wage-fixing arrangements between businesses, and cascading restraints. Client non-solicitation restraints and confidentiality obligations are treated differently from a prohibition on joining a competitor; as drafted, other restraints would remain available where necessary and reasonable to protect confidential information or client relationships. The proposals would apply to national system employers under the Fair Work Act.

An exposure draft is not law. Before enforcing or revising a clause, check what has been enacted, when it commences and any transitional arrangements. Neither blanket assurances that all restraints remain enforceable nor assumptions that every existing restriction has disappeared are a reliable basis for action.

For immediate protection, start with the current law, the particular obligation and the evidence. Contract templates also deserve review as the reforms develop.

09 How GopherWood Lawyers can help

GopherWood Lawyers acts for employers in restraint of trade and non-compete enforcement disputes, including matters involving customer connections and confidential information.

We assess enforceability and urgency, advise on preserving evidence, prepare proportionate demands and negotiate undertakings. Where court relief is justified, we build the employer's case around the specific conduct and the protection required.

If a former employee is approaching your clients, bring the contract and any variations, the resignation correspondence, relevant customer messages and a chronology of the suspected conduct. Tell us about upcoming renewals, approaches still occurring and any information at risk.

Call 02 9160 2157 or contact GopherWood Lawyers about protecting your business.

This article reflects material reviewed on 3 November 2026. It provides general information about Australian law, with a focus on NSW, and is not legal advice. The agreement, the facts, the jurisdiction and any legislative change affect the rights and remedies available.

10 Sources and further reading

  1. Restraints of Trade Act 1976 (NSW): s 4.
  2. Hanna v OAMPS Insurance Brokers Ltd [2010] NSWCA 267: client connections, non-dealing restraints and duration.
  3. Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172: confidentiality after employment and general know-how.
  4. Corporations Act 2001 (Cth): s 183.
  5. Australian Broadcasting Corporation v O'Neill [2006] HCA 46: general interlocutory injunction principles.
  6. Federal Court Practice Note GPN-UNDR: the usual undertaking as to damages. For NSW proceedings, see also Uniform Civil Procedure Rules 2005 (NSW) r 25.8.
  7. Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43: knowing assistance and an account of profits.
  8. Treasury Ministers, Banning unfair non-competes: release of the exposure draft, 7 September 2026. A proposal, not law in force.
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