You have found the right person. The offer letter is drafted, the start date is agreed, and then the candidate mentions, almost in passing, that their current employment contract contains a restraint of trade. For the next year they cannot work for a competitor, solicit clients of their old employer, or approach staff they used to manage. You are the competitor. What you do in the next few days decides whether you gain a valuable hire or receive a demand letter from the candidate's former employer.
The three ways this can play out
Once you know a restraint exists, you have three realistic options.
- Proceed with the hire and manage the risk: You assess the restraint, take steps to reduce the chance of enforcement, and start the person on terms that allocate the risk between you and them.
- Delay the start: If the restraint has only a short time left to run, waiting it out removes the problem entirely. The candidate may not be willing to wait, and you may not be able to afford to.
- Pass on the candidate: If the restraint is broad, the former employer is litigious, and the role cannot be adjusted, the cheapest answer may be to keep looking.
Notice what is not on the list: deciding whether the restraint is valid. That is a question for a court, and it only gets answered if someone sues. The decision you actually face is about likelihood and cost. How likely is the former employer to act, and what will enforcement cost you in legal fees, management time, and disruption? The rest of this article walks through the factors that answer those two questions.
What to weigh before you make the offer
The factors below are the ones a court, or a sensible lawyer, would look at first.
What the restraint actually says
The first step is to see the clause itself, not the candidate's summary of it. Ask the candidate for the relevant pages of their current contract in writing. Restraints come in several forms, and each carries a different risk:
- Non-compete clause: Restricts working for, or carrying on, a business that competes with the former employer, usually within a defined area and for a defined period.
- Non-solicitation clause: Restricts approaching, canvassing, or dealing with the former employer's clients, customers, or suppliers.
- Non-poaching clause: Restricts recruiting or enticing the former employer's staff or contractors.
- Confidentiality clause: Restricts using or disclosing the former employer's confidential information, including client lists and pricing.
Map out the area, the duration, and the activities each clause covers, and work out how much of that would be breached by the job you are offering. A restraint that does not actually bite on the role may be a non-issue.
Whether a court would enforce it
Restraints of trade are treated with suspicion at common law. The High Court has long held that they are prima facie void as contrary to public policy, because courts are reluctant to stop a person earning a living in their chosen field: Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288. A restraint will only be enforced to the extent that it protects a legitimate business interest of the former employer and is reasonable, with reasonableness judged at the date the contract was made: Sidameneo (No 456) Pty Ltd v Alexander [2011] NSWCA 418.
In practice, the factors a court weighs include:
- whether the former employer has a genuine interest to protect, such as confidential information or customer connections;
- the seniority of the role and the employee's access to those assets;
- whether the restraint is no wider than needed in area, duration, and activities; and
- the employee's ability to find alternative work using their training and skills.
Non-solicitation clauses are the restraints courts are most willing to enforce, because protecting a customer connection is a recognised legitimate business interest. Broad non-compete clauses covering ordinary employees are the hardest to justify. There is also a state-specific wrinkle: in NSW, s 4(1) of the Restraints of Trade Act 1976 (NSW) lets a court uphold a restraint to the extent it is not against public policy, even where it is drafted wider than necessary.
And the law is moving. In the 2025-26 federal Budget the Government announced it will legislate to ban non-compete clauses for low- and middle-income workers, along with wage-fixing and no-poach agreements, with the reforms expected to take effect from 2027. That is not law yet, and the announced ban is aimed at non-compete clauses rather than restraints protecting confidential information, but it is a sign that the courts and the Parliament are taking a narrower view of what employers can restrain.
How likely the former employer is to act
A restraint is only as dangerous as the person willing to enforce it. Most restraints are never enforced. Enforcement requires a lawyer, a court application, and a decision to spend money on a former employee. The likelihood of action tends to rise when:
- the employee left abruptly or took clients or files with them;
- the former employer has already enforced restraints against others;
- the market is small and the move is immediately visible; or
- the employee held a senior role with deep client relationships.
If you proceed, two broad approaches are open:
- Option A — Hire openly, having assessed the risk: You treat enforcement as a possibility, price it into the decision, and start the person with duties that steer around the restraint.
- Option B — Start quietly and hope: You avoid drawing attention to the hire. This rarely works. Former colleagues talk, clients talk, and the move is usually discovered. It also leaves you in the worst position if a dispute starts, because you will have taken no steps to protect yourself.
What enforcement would cost you
If the former employer acts, the usual steps are:
- A letter of demand and a request for undertakings: The former employer's lawyer writes to you, puts you on notice of the restraint, and asks you to confirm the employee will not breach it.
- An interlocutory injunction: The former employer applies to court to stop the employee working for you, or dealing with its clients, until the dispute is decided. The court asks whether there is a serious question to be tried and where the balance of convenience lies: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618. In Dundoen Pty Ltd v Richard Wills (Real Estate) Pty Ltd [2020] NSWSC 15, a real estate agency obtained an interlocutory injunction preventing a former senior property manager from taking up employment with a competitor, where the court found a serious question about the enforceability of the restraint but granted relief on the balance of convenience.
- A claim against you for inducing a breach of contract: If you knew the employee was bound by the restraint and intended them to breach it, you can be sued alongside the employee. The tort requires an intention to induce the breach and knowledge of its consequences: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (1995) 58 FCR 26. A genuine and reasonable belief that the restraint had expired or been waived is a defence, but once you have read the clause, you cannot claim to be ignorant of it.
Even a successful defence is expensive. Interlocutory applications are heard quickly, often within weeks, and the costs of preparing for them, together with the disruption of losing a new hire mid-onboarding, can exceed the value of the hire itself.
What you can do to de-risk the hire
The measures below reduce the chance of enforcement and improve your position if the former employer does act:
- Get the clause in writing before you offer: Ask the candidate to produce the restraint provisions from their current contract, so you are assessing the actual terms rather than a paraphrase.
- Design the role around the restraint: Adjust duties, territory, or reporting lines so the person is not soliciting the former employer's clients or using its confidential information during the restraint period.
- Delay the start date: If the restraint expires in a few months, a later start may be the cheapest fix.
- Allocate the risk in the contract: Include an indemnity from the employee, and where possible a warranty that they are not breaching their existing obligations, so that if the former employer claims against you the employee bears the loss.
- Consider approaching the former employer: In some cases a direct conversation, or a written undertaking about what the new role will and will not involve, heads off litigation. Your lawyer should handle this, because anything you say can be used against you later.
- Keep a file: Record the restraint, your assessment of it, and the advice you received. If a dispute later turns on what you knew and when, that record is your best evidence.
How an Artificer Legal lawyer helps you make the call
This is a decision where the downside is concentrated and the upside is a single hire, so the numbers rarely justify guessing. An Artificer Legal employment lawyer can:
- obtain and review the restraint clause, and tell you in plain terms how a court would likely treat it;
- stress-test the assumption that the former employer will not act, and model the cost of an injunction application and a claim for inducing breach of contract;
- negotiate the risk allocation, including the employee indemnity and the design of the role;
- handle any correspondence with the former employer's lawyers, including the response to a demand letter and any request for undertakings; and
- if a dispute is commenced, coordinate the urgent steps needed to defend an interlocutory injunction.
Ask for the clause before you make the offer
The mistake that costs the most in this situation is not misjudging whether the restraint is valid. It is making the offer without ever reading the clause, and then learning about it from a demand letter. Ask for the restraint provisions in writing before you commit, and if you cannot get them, treat the hire as higher risk. If you have the clause and you have weighed the factors above, you can make the decision with your eyes open.
To summarise the key points: restraints of trade come in several forms and are only enforceable where they protect a legitimate business interest and are reasonable. The real risk is not the clause itself but the former employer's willingness to enforce it through undertakings, interlocutory injunctions, and claims for inducing breach of contract. You can reduce that risk by seeing the clause, designing the role around it, and allocating the risk in the employment contract. Where the numbers are material, an employment lawyer is the difference between a confident hire and a costly guess.