Non-Solicitation Agreement (Australia)

A Non-Solicitation Agreement in Australia is a legally binding written instrument.

A Non-Solicitation Agreement is a form of post-employment restraint that prevents a departing employee or contractor from actively approaching the employer's existing clients, customers, or other employees for a defined period after the employment relationship ends. Unlike a non-compete agreement, a non-solicitation agreement does **not** prevent the employee from working in the same industry, joining a competitor, or starting a competing business — it simply prohibits targeted solicitation of specific relationships.

### Legal Framework

Non-solicitation agreements in Australia are governed by the **common law restraint of trade doctrine**. Under this doctrine, any restraint on an employee's post-employment activities is prima facie void as contrary to public policy, but will be upheld if the employer can demonstrate:

1. A **legitimate protectable business interest** — such as established client relationships, goodwill, or workforce stability
2. The restraint is **no wider than reasonably necessary** to protect that interest

Australian courts apply the same reasonableness test to non-solicitation clauses as they do to non-compete clauses, but they are generally **more willing to enforce non-solicitation provisions** because they are less restrictive of the employee's fundamental right to earn a livelihood. The employee remains free to work in the same industry and to accept clients who approach them unsolicited.

### The Restraints of Trade Act 1976 (NSW)

In New South Wales, the **Restraints of Trade Act 1976 (NSW) s 4** provides that a restraint of trade is valid to the extent it is not against public policy. This means NSW courts can **read down** a non-solicitation clause that is broader than necessary and enforce it to the extent it is reasonable. In other states and territories, the strict common law approach applies.

### Two Categories of Non-Solicitation

Non-solicitation agreements typically contain two distinct types of restriction:

• **Client or customer non-solicitation** — prevents the employee from approaching or canvassing clients or customers of the employer, typically limited to those with whom the employee had material contact during a defined period (such as the last 12 to 24 months of employment)
• **Staff non-solicitation (non-poaching)** — prevents the employee from recruiting, inducing, or encouraging the employer's remaining staff to leave. This protects the employer's investment in its workforce and prevents systematic team extraction

### Non-Solicitation vs Non-Dealing

A critical distinction exists between **non-solicitation** and **non-dealing** clauses. A pure non-solicitation clause only prevents the employee from actively approaching clients — if a client proactively contacts the former employee of their own accord, there is no breach. A **non-dealing clause** goes further and prevents any business dealings with the employer's clients, regardless of who initiates contact. Non-dealing clauses are treated more like non-compete clauses and are subject to closer scrutiny by Australian courts.

### Enforceability Factors

Australian courts consider several factors when assessing the enforceability of a non-solicitation agreement:

• The **nature and extent of client relationships** developed during employment
• The **seniority** of the employee and their degree of client contact
• The **commercial sensitivity** of the client relationships
• Whether the restriction is limited to clients with whom the employee had **material personal dealings**
• The **duration** of the restriction (six to twelve months is most commonly upheld)
• Whether adequate **consideration** was provided for the restraint

## When Do You Need a Non-Solicitation Agreement in Australia?

A Non-Solicitation Agreement is appropriate whenever an employee has developed meaningful relationships with the employer's clients, customers, or other employees during the course of their employment, and the employer has a legitimate interest in protecting those relationships after the employee departs.

### Common Situations Requiring a Non-Solicitation Agreement

• **Sales professionals and account managers** — Employees whose primary role involves managing and developing client relationships. These employees often become the primary point of contact for clients, and their departure could result in the loss of those relationships to a competitor
• **Professional services firms** — Lawyers, accountants, financial advisers, consultants, and other professionals who develop deep personal relationships with clients based on trust and expertise
• **Recruitment consultants** — Recruiters who maintain extensive candidate and client databases and whose relationships are the core asset of the recruitment business
• **Insurance brokers and financial planners** — Professionals who manage ongoing client portfolios and where clients often follow the adviser rather than remaining with the firm
• **Real estate agents** — Agents who develop relationships with property owners and investors
• **Senior managers and executives** — Leaders who have broad visibility across the client base and significant influence over team members

### When a Non-Solicitation Is Preferable to a Non-Compete

In many situations, a non-solicitation agreement is more appropriate and more enforceable than a full non-compete:

• Where the employer's primary concern is **protecting specific client relationships** rather than preventing the employee from working in the industry generally
• Where the employee is **mid-level or junior** and a non-compete would be disproportionate
• Where the employer wants a restraint that is **more likely to be upheld by courts**, given that non-solicitation clauses face less judicial scrutiny than non-compete clauses
• Where the employer operates in a **specialised industry** with limited employment options, and a non-compete would effectively prevent the employee from earning a livelihood

### Timing Considerations

As with non-compete agreements, the timing of when a non-solicitation agreement is introduced affects its enforceability:

• **At commencement of employment** — the offer of employment provides consideration for the restraint
• **Mid-employment** — additional consideration (promotion, salary increase, bonus, or specific payment) must be provided
• **On termination** — a non-solicitation clause agreed as part of a settlement or deed of release may be supported by the consideration provided under that deed

### Standard practices for Australian Employers

To maximise the prospects of enforcement, employers should:

• Limit the restriction to clients and employees with whom the departing employee had **material personal contact** during a defined period
• Keep the duration **proportionate** — six to twelve months for most employees
• Clearly distinguish between **solicitation** (which is prohibited) and **passive acceptance** of unsolicited approaches (which is typically permitted)
• Include **cascading provisions** with alternative durations and scope
• Confirm the agreement is properly executed and supported by adequate consideration

## Key Elements of an Australian Non-Solicitation Agreement

A well-drafted Non-Solicitation Agreement should be precise, proportionate, and clearly define the boundaries of the restriction. The following elements are essential.

### 1. Parties and Recitals

• Full legal names, ABNs, and addresses of the employer and employee
• A description of the employee's role and the nature of their client or staff contact
• Identification of the legitimate business interest being protected (client relationships, goodwill, workforce stability)

### 2. Definitions

• **Client** — a precise definition identifying the class of clients covered, typically limited to those with whom the employee had material dealings during a specified period (e.g., the last 12 or 24 months of employment)
• **Solicitation** — a clear definition of what constitutes active solicitation, including direct contact, indirect contact through third parties, and use of social media to approach clients
• **Restricted Period** — the duration of the restriction following termination
• **Protected Employee** — for staff non-solicitation, a definition of the employees covered

### 3. Client Non-Solicitation Clause

• A prohibition on the employee directly or indirectly soliciting, canvassing, or approaching the employer's Clients for the purpose of providing services that compete with the employer's business
• A clear statement that **passive acceptance** of unsolicited approaches from clients is not a breach of the agreement
• Limitation to clients with whom the employee had **material personal contact** during the defined period

### 4. Staff Non-Solicitation (Non-Poaching) Clause

• A prohibition on the employee recruiting, inducing, encouraging, or enticing the employer's Protected Employees to leave their employment
• Typically limited to employees with whom the departing employee had a meaningful working relationship
• Clarification that the clause does not prevent the departing employee from hiring someone who independently applies for a role without solicitation

### 5. Cascading Provisions

• **Duration cascades** — alternative restricted periods in descending order (e.g., 12 months, 9 months, 6 months, 3 months)
• These are critical outside NSW, where courts cannot read down restraints under the Restraints of Trade Act 1976 (NSW)
• Each tier must be expressed as a genuine alternative

### 6. Consideration

• If at commencement: the employment itself provides consideration
• If mid-employment: documented additional consideration (promotion, salary increase, bonus, one-off payment, or access to new confidential information)
• The consideration must be genuine and identifiable

### 7. Confidentiality Obligations

• A complementary obligation not to use or disclose the employer's confidential information, including client lists, contact details, pricing, and terms of engagement
• This reinforces the non-solicitation restriction by preventing the employee from using confidential client information to target the employer's clients

### 8. Remedies for Breach

• Acknowledgement that damages may be inadequate to compensate for a breach of the non-solicitation obligations
• The employer's right to seek **injunctive relief** from a court of competent jurisdiction
• The employer's right to recover damages for any loss suffered

### 9. Obligations on Termination

• The employee's obligation to return all company property, documents, and copies of client records on termination
• Confirmation that the non-solicitation obligations survive termination of the employment relationship
• A requirement to disclose new employment details to the employer (optional but recommended for monitoring compliance)

### 10. Severability and Governing Law

• A severability clause providing that if any part of the restraint is found unenforceable, the remaining provisions continue
• Reference to the Restraints of Trade Act 1976 (NSW) for NSW-based agreements
• Governing law of the applicable state or territory
• Submission to the jurisdiction of the courts of that state or territory and the Federal Court of Australia

Under the Fair Work Act 2009 (Cth), the Fair Work Commission (FWC) adjudicates workplace disputes. Section 394 of the Fair Work Act 2009 governs unfair dismissal claims. The Fair Work Ombudsman (FWO) enforces compliance with the National Employment Standards (NES). The Privacy Act 1988 (Cth) and Australian Privacy Principles (APPs) govern personal data handling. The Australian Taxation Office (ATO) administers PAYG withholding and superannuation guarantee obligations under the Superannuation Guarantee (Administration) Act 1992. The forms-legal.com Non-Solicitation Agreement (Australia) template covers the mandatory elements under Fair Work Act 2009 (Cth).