What your contract actually contains
The express terms are the ones you and your employer agreed — in the letter of offer, the signed contract, or sometimes in emails and conversations. A document you sign binds you even if you did not read it. An entire agreement clause, saying the written terms are the whole deal, usually shuts out earlier promises, though not every claim.
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Workplace policies are part of your contract only if the parties intended them to be. There is no general rule either way. It turns on the wording — a manual that says it is not contractual usually is not.
Then there are implied terms, which bind you without being written down. Some are implied into every employment contract as a matter of law. Others are implied into a particular contract only if they are so obvious they go without saying and are needed to make it work. Courts are slow to do the second, especially where the written contract is detailed.
| Implied into every employment contract | Not implied |
|---|---|
| You must obey directions that are lawful and reasonable | A term of mutual trust and confidence — the High Court rejected it in 2014 |
| You must serve faithfully — the duty of fidelity | Your award or enterprise agreement. It applies by statute, alongside the contract, not as part of it |
| Your employer must take reasonable care for your safety | A general duty on your employer to act fairly — still an open question in Australia |
| Where no notice period is agreed, reasonable notice to end it | A right for your employer to pay you out instead of giving notice, unless the contract gives one |
A direction is lawful and reasonable only if it is both. It must be within the scope of the job you were engaged to do, and it cannot require you to break the law.
A $28,860-a-year sales assistant, sued over her phone contacts
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Ms Dong started as a full-time sales assistant at Luvalot Clothing's showroom on Kippax Street in Surry Hills on 31 July 2012, on a salary of $28,860 a year. She had no work phone, so she used her own mobile and WeChat to send buyers photos of new stock. In January 2017, while on unpaid maternity leave, she resigned. In June 2017 she started as sales manager at Sasha, another wholesaler on the same street.
When she resigned, Luvalot's founder messaged her that she had been 'stabbed in the back' and that it was 'easy to come to find you'. The court later found those messages were meant to threaten her with legal action. Luvalot then sued, saying she had misused its confidential customer list and broken a clause stopping her from dealing with its customers after she left.
Justice Anderson rejected the confidentiality claim. Luvalot could not say precisely what its 'Customer Details List' was. Its customer records sat on office computers with no password that any staff member could open, and Luvalot published some customers' names on its own website. On Kippax Street, the court found, buyers were well known to the wholesalers along the street and their numbers could be found with a basic Google search. The customers Ms Dong remembered from more than four and a half years of serving them were part of her own general skill and knowledge.
The restraint failed too. Barring a junior employee on $28,860 from working in wholesale clothing for 12 months, or even six, went well beyond protecting Luvalot's customer relationships, the court held, and the clause was invalid. The judge added that a restraint of no more than two months would have been acceptable. Luvalot's claim was dismissed and it was ordered to pay Ms Dong's costs.
A contract that calls customer lists confidential does not turn every name and number into a secret. Where customers are well known in the trade and you simply remember them, a court may treat that as your own know-how, and a long restraint on a junior worker is hard for an employer to justify.
Ms Dong worked in New South Wales, so the Restraints of Trade Act 1976 (NSW) applied. The judge's view that two months would have been acceptable was a passing remark, not an order: Ms Dong had not applied to have the clause cut down. She first emailed customers for Sasha about four months after her employment with Luvalot ended.
Your duties while you are still employed
The duty of fidelity lasts until the last hour of your employment — including a notice period spent at home on garden leave. It means not acting against your employer's interests in anything important, not misusing its confidential information or client connections, and accounting for opportunities that come to you through the job.
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Planning to leave is allowed. Competing before you go is not.
| Usually fine | Usually a breach |
|---|---|
| Applying for other jobs, without telling your employer | Telling clients you are leaving and asking them to follow you |
| Deciding to set up on your own, and taking preparatory steps | Secretly compiling a client list for the new business |
| Setting up a company for after you leave | Copying or emailing the employer's files to yourself |
| Truthfully answering a client who asks what you are doing next | Recruiting colleagues to come with you, depending on how it is done |
Courts come down hard on anyone caught copying files or redirecting work while still employed. Keeping your own contract, payslips and records is one thing. Taking the employer's client data is another.
Senior employees can owe more. Where a manager has undertaken to act in the employer's interests, equity may treat them as a fiduciary — someone who must not let personal interest conflict with duty, and must not divert a business opportunity the employer was pursuing, even after resigning. Most employees are not fiduciaries. If your employer is a company, the Corporations Act 2001 (Cth) also forbids an employee from improperly using their position to gain an advantage (s 182), or improperly using information obtained through the job (s 183). The s 183 duty continues after you leave.
Confidential information, and what is yours to keep
Even without a clause, equity stops you using or disclosing information that has the necessary quality of confidence, received in circumstances that made it plain it was confidential. The employer has to identify the information specifically — a general claim that you know "our business" is not enough.
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What equity will not take from you is your own skill, knowledge and experience — the know-how you built up doing the job. After you leave, protection is limited to information a person of ordinary honesty would recognise as belonging to the employer, and which can be separated from what you simply know. Courts look at how hard the information was to acquire, how jealously it was guarded, whether you were told it was confidential, and how senior you were.
| Usually protected | Usually yours |
|---|---|
| Trade secrets, formulas and processes | General skills, methods and industry knowledge |
| A compiled client list, especially with prices, margins or buying history | Clients you remember and can find again from public sources |
| Pricing, margins and business plans, in a senior employee's hands | Information already in the public domain |
The line between a client list and remembered clients matters. Using your natural recollection of who the clients are is generally lawful. Removing, copying or deliberately memorising the employer's list is not — even if you could have rebuilt it from other sources.
A contractual confidentiality clause can protect more than equity would, but only if it defines the information precisely. A broad clause is usually read as going no further than the equitable duty, and wording that lasts "forever" will not be read as protecting information after it stops being confidential.
A 17-year insider, a 'Secret Group' chat and a rival business
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Peter Williams worked for PGA Laminating, a family-run Victorian maker of plastic film for food packaging, from June 2000 until 17 November 2017. He was the owner's brother-in-law, and as business development manager he looked after PGA's customer accounts. From July 2017, while still employed, he began working with a PGA sales contractor and a supplier's employee to set up a competing business.
In an email headed 'General starting', sent from his personal Gmail account, Mr Williams told the others they had '2 clients that we believe can and will move quickly'. One was Don Smallgoods, which provided about half of PGA's business. While he worked on PGA's tender to Don Smallgoods, he sent the contractor PGA's prices and volumes, and the new venture lodged a tender designed to undercut PGA. The three also kept a WhatsApp group called 'Secret Group'.
Two days before he resigned, Mr Williams sent another customer, Northside, a letter putting PGA's prices up; the court found he had suggested the rise to make PGA less competitive, and Northside later took its business elsewhere. The day before he resigned, he removed a large volume of files from around his desk after hours; he said they were mostly personal, and the court could not say what was taken. A laptop he used for PGA work, which he had reported stolen, came back to PGA with all its files deleted.
Justice Beach found that Mr Williams breached his employment contract, his duties under ss 182 and 183 of the Corporations Act 2001 (Cth), his duty of confidence and his fiduciary duties, and infringed PGA's copyright. His claim to part-own the business did not help: even an owner could not take the company's information for himself. The court was not satisfied that his breaches of fiduciary duty were fraudulent and dishonest. The contractor and his company were liable as accessories to the statutory and confidence breaches.
You do not need a restraint clause to be in trouble. While you are still employed you owe your employer loyalty, and using its prices, tenders or customers to build a competing business before you leave can make you liable, along with anyone who knowingly helps.
This judgment decided liability only; damages and the final orders were left for a later stage.
Restraints of trade after you leave
A restraint of trade is a clause limiting what you can do after the job ends. The starting point is that it is contrary to public policy and void. It is enforceable only if your employer proves it goes no further than reasonably necessary to protect a legitimate interest. Protection from competition as such is never a legitimate interest.
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What an employer can legitimately protect
- Customer connection — where you became the "human face" of the business to its clients, so you could take their custom with you. Frequent contact or a friendly manner is not enough on its own.
- Confidential information — including information short of a true trade secret, where the line between what is confidential and what you know is hard to police.
- A stable workforce — supporting a clause against poaching staff. There is no legitimate interest in stopping you leaving.
The common types, from narrowest to widest
| Clause | What it stops |
|---|---|
| Non-solicitation | Approaching the employer's clients to move their business. Accepting work a client offers unprompted is not soliciting — but encouraging them, directly or through a new employer, is |
| Non-dealing | Doing business with those clients at all, even if they come to you |
| Non-poaching | Recruiting or enticing the employer's staff |
| Non-compete | Working in a competing business at all. The widest, and the hardest to justify |
How reasonableness is judged
- At the date you signed, on what the clause allowed the employer to do — not on how it is being used now.
- Duration — usually the time a replacement needs to win the clients' confidence, or for confidential information to go stale.
- Area and activities — no wider than the business actually carried on. A clause covering clients you never dealt with, or a whole industry, is likely too wide.
- All together — each element can look reasonable on its own and the combination still fail.
- Your signature is not the end of it. A clause saying you agree the restraint is reasonable is relevant, but the court decides.
Courts also construe the clause before judging it. Where the wording is ambiguous, the narrower reading — the one that restrains you less — is preferred.
Cascading clauses, and why the state matters
Many contracts use a cascading or ladder clause: 12 months, or failing that 6, or failing that 3; Australia, or failing that the state, or the city. At common law a court can strike out the parts that go too far (severance) but will not rewrite the clause. A well-drafted cascade is generally valid, and the employer keeps the widest combination that survives.
In New South Wales the Restraints of Trade Act 1976 (NSW) reverses the starting point: a restraint is valid to the extent it is not against public policy, so a court can enforce an over-wide clause to a reasonable extent. The rest of Australia, including Western Australia, has no equivalent — an over-wide restraint stands or falls, subject to severance. Check the governing-law clause: a contract governed by NSW law can bring the NSW Act with it.
Garden leave
Some contracts let the employer keep paying you through a long notice period while you stay home. You are still employed, so the duty of fidelity still applies. A garden leave period is easier to justify than a post-employment restraint, because you are being paid, but it is still subject to reasonableness. Paying you through a restraint does not, by itself, make an excessive one valid.
Inventions and intellectual property
An invention you make doing the work you are employed and directed to do, using your employer's time and materials, belongs to your employer. Employment alone is not enough, though: the work has to fall within your actual duties at the time. Most written contracts also carry an intellectual property clause, and what it says will usually decide the question.
If you are threatened with an injunction
A letter demanding that you stop working for a competitor, return property or give undertakings usually comes before any court application. What the employer would need to show for an urgent interim injunction is a serious question to be tried — that the restraint is arguably valid and you have arguably breached it — and that the balance of convenience favours stopping you until trial. Where the restraint would run out before any trial, the court looks harder at the merits.
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- Do not ignore it, and do not let the deadline in the letter pass without a response.
- Be careful with anything that looks like a breach. Carrying on can add to what the employer claims, while stopping may cost you the new role. Which matters more depends on how strong the restraint is.
- Return or preserve, do not delete. Deleting files after a demand looks worse than the files themselves. Return the employer's property and information, and keep a record of what you returned.
- Read the clause for what it actually says — its definitions, its duration, and whether your new role is really inside it.
- Consider undertakings. A court may accept an adequate written promise to the court instead of granting an injunction. An undertaking is binding, so it must be one you can keep.
- Get advice before you sign anything — an undertaking, a deed or an admission.
An employee who joins a competitor in defiance of a valid restraint runs a real risk. Damages are treated as an inadequate remedy for restraint breaches, so an injunction is the usual order if the restraint holds up.
Negotiating a restraint when you leave
Restraints are often negotiable, especially when you resign on good terms or are leaving under a settlement. Some restraints carry an exception for the employer's written consent, and the courts treat that consent as something the employer cannot unreasonably withhold. Some employees ask for it before they start somewhere new.
