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  • Writer's pictureSam Wilks

Are Security non-compete Agreements enforceable in Australia?

Non-compete agreements in Australia are typically governed by state and territory legislation, rather than federal law. The legal framework varies across jurisdictions, but the principles underlying non-compete laws are generally consistent. The following are my researched appraisal on the current state of non-competes in Australia.

Reasonableness: Non-compete clauses must be reasonable in their scope, duration, and geographic area to be enforceable. The courts will assess whether the restrictions go no further than what is necessary to protect the legitimate interests of the employer. For instance, a non-compete may restrict actions in a suburb, a town, a city, or a state; however, this must be specified in writing prior, if no specific "region" is stipulated, then the courts may choose the smallest distance to ensure that the staff member is not unreasonably penalized by the clause. The reasonableness of a clause depends on factors such as the nature of the industry, the employee's role, and the potential harm to the employer's business.

Are non-compete clauses legally binding?

Non-compete clauses can be legally binding in Australia under certain conditions. However, their enforceability depends on various factors, including the reasonableness of the clause, its scope, and the specific circumstances of the case.

Courts in Australia assess the reasonableness of a non-compete clause by considering its duration, geographical limitations, and the legitimate business interests being protected.

How long is a non-compete clause in Australia?

The length or duration of a non-compete clause in Australia varies depending on the circumstances and the industry involved. While there is no specific maximum duration set by legislation, courts generally look at the reasonableness of the restriction.

Typically, non-compete clauses that attempt to extend beyond 12 months are considered more likely to face scrutiny and may require stronger justification to be deemed enforceable. Most business transaction clauses for instance are no longer than 2 years as decisions in tribunals have failed to recognise periods longer.

Protection of legitimate interests: Non-compete clauses are intended to protect specific legitimate interests of the employer, such as confidential information, trade secrets, customer connections, or specialised training provided to the employee. The clause should be drafted to reasonably safeguard these interests without unreasonably restricting the employee's ability to find suitable employment. For instance, security personnel with specialised training in "dog handling" may be restricted for a 12 month period, yet able to perform any other security roles within that 12 month period.

Consideration: For a non-compete clause to be enforceable, the employee must receive some form of consideration in return. This consideration could be in the form of employment, a promotion, access to confidential information, or some other benefit that the employee gains by agreeing to the non-compete restriction.

Public policy: Non-compete agreements must not be contrary to public policy. This means that restrictions cannot unduly prevent an employee from earning a living or pursuing their chosen profession. The courts will consider whether the clause is in the public interest and whether it strikes a fair balance between the party's rights. This case may be made by the plaintiff (the previous employer) against the defendant (the employee), it is a civil case and generally, the legal representation cost of litigating the cases is well into the tens of thousands of dollars. The court costs are seldom awarded to the Plaintiff and the cases have a very thin margin of success in Australia.

Restraint of trade doctrine: In some jurisdictions, non-compete clauses are subject to the "restraint of trade" doctrine, which aims to prevent unreasonable restrictions on trade or competition. This doctrine requires that the restriction be reasonably necessary to protect the employer's legitimate interests and not go beyond what is reasonably required.

It's important to note that the enforcement of non-compete clauses can be complex, and each case is assessed individually based on its specific circumstances. Court and tribunal decisions and interpretations may also influence the legal landscape. Therefore, if you need precise information regarding non-compete laws in Australia, it's advisable to consult an employment lawyer who can provide advice tailored to your situation and the relevant jurisdiction. Most of these cases are referred to Civil administration tribunals for mediation, lawyers are generally not required in these tribunals.

If the perceived cost is over $25,000, it may be referred to magistrate court; however, as the initial costs may be extremely high for the business the loss of valuable intellectual property must be quantifiable and highly valuable to seek to place an injunction on the actions of a past employee. If the actions are deemed to be malicious or punitive then severe industrial fines may be applicable to the business and its directors for breaches of their fiduciary duty.

A non-compete clause can provide a business with protection from former employees competing against it. However, it is important to understand that a non-compete clause may not be reasonable in all circumstances and/or industries.

About the author- The opinions and statements are those of Sam Wilks and do not necessarily represent whom Sam Consults or contracts to. The above information can be cited and is not to be taken as legal advice only opinion. Sam Wilks is a skilled and experienced Security Consultant with almost 3 decades of expertise in the fields of Real estate, Security, and the hospitality/gaming industry. His knowledge and practical experience have made him a valuable asset to many organizations looking to enhance their security measures and provide a safe and secure environment for their clients and staff.

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