National reforms to the enforceability of non-competes and other restrictive covenants are anticipated to commence in 2027, in particular in relation to low and middle-income workers. The extent to which non-solicit and non-deal provisions will be impacted (for all employees) remains unclear.

In the meantime, and for employees outside of the scope of those reforms, the enforceability of restraints remains subject to established common law and, for those in NSW, statutory requirements.

Recent decisions illustrate how subtle differences in drafting, evidence, and contractual mechanics can produce sharply different outcomes. Drafting that is commonly used and relied on to protect valuable assets and relationships has been held unenforceable.

Employers are placing an increasing focus and reliance on non-solicit and non-deal provisions to protect their valuable assets and relationships, however Courts continue to apply increasing scrutiny to the scope of these restraints.

The current standard

Restraint of trade clauses, most commonly non‑compete, non‑solicitation and non‑dealing provisions, are a familiar feature of Australian employment contracts and remain one of the most actively litigated areas of employment law. Employers rely on them to protect legitimate business interests, including confidential information, goodwill, and key client or employee relationships.

At common law, however, restraints are presumed void unless the employer can show:

• they are reasonable in scope, duration and geographic reach; and
• no broader than necessary to protect legitimate business interests.

In assessing these requirements, Courts also look closely at the employee’s actual role, the nature of any sensitive information they had access to, and whether the restraint is appropriately targeted to the risks posed by their departure.

At common law, enforcement commonly turns on whether an employer can satisfy interlocutory injunction requirements, namely, establishing a serious question to be tried and showing that the balance of convenience favours granting interim relief.

Recent case guidance

Queensland Supreme Court Injunctive Guidance

The Queensland Supreme Court refused to enforce non‑solicitation and related restraints against a departing financial adviser on an interim basis. The critical problem was in the company’s definition of “Client”, which encompassed not only the company’s own clients but also those of ‘related entities’. Even where that definition included a filter so as to only apply to ‘Clients’ that the employee had ‘worked or had contact or dealings’ with, the Court concluded that arguments for validity were “not strong”.

The Court further described the drafting issues as “real challenges” and emphasised that the clause’s uncertainty could not be cured by severance or judicial construction.

The definition of ‘Client’ in this matter is not unusual and the decision serves as a reminder of the importance of ensuring that restraints are only drafted so far as is genuinely required to protect the intended interests.

City Fertility Sydney CBD Pty Ltd v Reims Investments Pty Ltd & Anor [2025] QSC 210

By contrast, the City Fertility v Reims decision provides a useful example of when a court will enforce a restraint. City Fertility, which runs IVF clinics in Queensland, had a services contract with Reims Investments, the corporate entity for IVF specialist Dr Simone Campbell. A disagreement emerged over how Cycle Management Fees should be calculated, leading Reims to issue termination notices. The Court ultimately found those notices were invalid, confirming City Fertility’s interpretation of the fee‑increase mechanism and holding that the agreement had not been properly terminated. This allowed City Fertility to accept Reims’ repudiation and rely on the post‑termination restraints.

Under those restraints, Dr Campbell and her entity were prevented from treating restricted patients, practising within 50 kilometres of the Newstead and Sunnybank clinics, and soliciting City Fertility’s patients for a 12‑month period.

Notably, the definition of ‘restricted patients’ related only to those that the Respondent has ‘direct and substantial dealing‘ in the prior two years.

The Court accepted evidence that IVF providers invest heavily in their facilities, approximately $6 million in fit‑out and $1.5 million in specialised equipment, and that patient relationships typically span multiple years. This was enough to establish a legitimate goodwill interest capable of protection. Given the relatively modest 12‑month timeframe and the clear geographic nexus, the Court considered the restraint reasonable and granted an injunction accordingly.

The case shows that where a restraint is tied to a genuine protectable interest and framed proportionately, courts are prepared to enforce it.

2nd Chapter Pty Ltd & Ors v Sealey & Ors (No 2) [2024] VSC 672

The Victorian Supreme Court’s decision in 2nd Chapter v Sealey provides an important counterbalance. Although the case involved a transaction context, typically more favourable to restrictions, the Court nonetheless refused to enforce the non‑compete and non‑solicitation clauses contained in suite of employment, shareholder and sale‑related documents. The restraints applied to all clients of the business, rather than those with whom the advisers had worked directly. The Court held that this exceeded what was reasonably necessary to protect goodwill, because the advisers had no personal connection with many of those clients and therefore no relationship capable of protection.

Duration was also problematic in that one restraint lasted up to five years, and others were tied to uncertain contractual milestones. Attempts to rely on the “blue pencil” principle failed because the necessary revisions would have required rewriting, not mere excision. Here, the drafting was simply too broad for the Court to rescue. Even in commercial or sale of business contexts, the decision signals that courts will no longer automatically assume long or broad restraints are justified.

Key Takeaways for Employers

Courts continue to apply a highly fact‑specific test to restraints, but the following questions reflect the issues that have repeatedly influenced outcomes in the recent decisions:

For employers, these decisions create both opportunity and risk. Well drafted restraints can remain a powerful tool in protecting client relationships and intellectual capital, but they demand careful calibration. Now is the ideal time for businesses to review their employment, contractor, and services agreements to ensure that restraint provisions will withstand close judicial scrutiny when challenged.

This article was written by Chris Shelley, Partner and Shivani Gandhi, Solicitor.