Restraint of trade clauses

Quick guide

• Check your contract for a restraint of trade clause.
• If it has one, understand what it restricts: typically, the location you can work at and what job you can do, and whether you can have dealings with the practice's patients or staff — both while you're there and for a period after you leave
• If you do not understand the clauses or you're worried you won't be able to comply, seek advice before you sign

What is a restraint of trade clause?

A restraint of trade clause seeks to protect the legitimate business interests of the practice while you are working at the practice and after you leave.

Restraint of trade clauses include clauses that seek to prevent you from:

• working for a competing business or from starting your own competing business (non-compete clauses)
• soliciting patients, referrers or suppliers of the practice after you leave the practice (non-solicitation clauses)
• recruiting the practice’s staff after you leave the practice or encouraging the staff to leave their employment or engagement with your former practice (non-recruitment clauses).

It is common to hear that restraint clauses are not enforceable, but this not correct.

A court will generally consider a restraint clause to be valid, and therefore enforceable, if the clause is:

• certain in its terms (i.e. the clause is not ambiguous and can be understood)
• reasonably necessary to protect the legitimate business interests of the business
• is not against public policy.

In the medical practice context, unfair competition can arise from the exploitation of legitimate business interests, for example, the interest of the practice in its patient and referral connections, its confidential information, such as patient contact details, business costs and income, known only to a person because they have worked at the practice.

A court will consider whether the clause is valid or not based on the circumstances at the time the agreement was made, rather than when the working relationship ends.

Non-compete clause

A non-compete clause seeks to stop you from working for a competing business or from starting your own competing business for a period of time.

In considering whether the obligation is reasonable, the courts will consider several factors.

The geographical restriction 

This is the part of the clause preventing you from working in competition within a certain distance from the practice.

A court will not enforce a restraint if the geographical area is too broad.

Whether the geographical area is too broad will depend on factors such as the location of the practice (urban or rural) and the likelihood that patients will leave the practice to see a medical practitioner at another practice.

Generally, a geographical restraint of 5km or less will probably be considered valid in urban areas while a greater restraint area might be valid in rural areas, depending on the circumstances of each case.

Some agreements use “Restraint Area” as a cascading restraint clause. For example, the clause might say something like:

Restraint Area:

• A 50km radius from the practice; or
• If that is not reasonable, a 25km radius from the practice; or
• If that is not reasonable, a 10km radius from the practice.

A cascading restraint clause sets out several geographical restrictions of different sizes, each written as its own separate clause. This gives a court flexibility: if the widest restriction is found too broad to enforce, the court can fall back on a narrower one instead of striking out the whole clause.

Without a cascading clause, the single geographic restriction in the contract will only be enforced if the practice can convince a court it is a necessary requirement to protect a legitimate business interest to in that area.

NSW is an exception: legislation in NSW lets the NSW Supreme Court "read down" an overly broad restraint — that is, replace it with a narrower area — if the court agrees that some restraint is reasonable.

Note also that where a contract restricts you within a certain radius of the practice, "radius" means straight-line distance ("as the crow flies"), not driving distance. Several websites can help you calculate this.

The time restriction 

This part of the clause dictates the period of time you are prevented from competing or soliciting patients or staff, after you stop working at the practice.

A court will not enforce a restraint if the time restriction is too long.

What counts as reasonable depends on the circumstances and the legitimate business interest the practice is protecting, but courts often treat three to six months after the end of the contract as reasonable. That said, courts look at the whole context, and in some cases will enforce a longer period.

Some agreements use "Restraint Period" as a cascading clause — setting out several time restrictions of different lengths, each written as its own separate clause. As with other cascading clauses, this gives a court flexibility: if the longest period is found unenforceable, the court can fall back on a shorter one instead of striking out the whole clause.

Without a cascading clause, the single time restriction in the contract will only be enforced if the practice can convince a court the time restriction is necessary to protect the specific legitimate business interest, e.g. a 6-month period is necessary for the practice to form and secure a new connection between its suppliers and your replacement .

NSW is again an exception: legislation there lets the NSW Supreme Court "read down" a restraint it finds too long, replacing it with a shorter period, if the court agrees that some restraint is reasonable and necessary.

The restraint scope

A court will not enforce a restraint that is too broad in scope.

For example, a court will not be likely to enforce a restraint that stops you from practising medicine anywhere at all .  That is because it would stop you from working as a medical practitioner in a public hospital, government department or other business that doesn’t compete with the practice. These are circumstances where the restriction could be too broad to be enforceable because the public interest is served when doctors can provide medical services to the public and can earn an income..

By contrast, a court may enforce a restraint that stops you from performing the same or similar work for a competing business within a reasonable geographic period, during your engagement, and for a reasonable period of time after it ends.

Non-solicitation clause

A non-solicitation clause seeks to stop you from soliciting patients, referrers or suppliers of the practice after you leave the practice.

Soliciting any patient or supplier

A non-solicitation clause may seek to stop you from soliciting or contacting any patient or supplier of the practice.

A court is unlikely to enforce this clause because:

• it extends to patients you did not necessarily treat and suppliers you did not necessarily deal with during your engagement at the practice.
• given that you are prevented by your duty of confidentiality from taking patient or supplier contact information when you leave the practice, you will not generally know which potential patients coming to you in your new practice were also patients of your former practice, or which organisations were suppliers of your former practice.

Although a broad clause like this may not be enforced, we strongly recommend that you do not actively solicit the practice’s patients or suppliers. For example, do not take a patient or supplier list or target marketing directly to patients of the practice (e.g. post letters to patients of the practice).

General marketing which does not mention the practice you are leaving, such as advertising in the local paper or doing general letterbox drops, is fine.

Soliciting patients you treated at the practice or suppliers you dealt with at the practice

A non-solicitation clause may seek to stop you from soliciting or contacting patients you treated at the practice or suppliers you dealt with. A court may enforce this clause, especially if it is limited to not soliciting patients of the practice you treated or suppliers you dealt with in recent times (e.g. during your last 12 months at the practice).

If you are a non-GP specialist and patients are referred directly to you, before you sign an agreement, you may wish to ask for this clause to be deleted as your patients may want to continue to see you when you move to a new practice.

Treating patients who seek treatment from you or dealing with suppliers who approach you

Some non-solicitation clauses may go even further, seeking to stop you from treating patients or using suppliers who come to you on their own, without any contact or encouragement from you. For example, the clause might try to stop you from “accepting any approach” from a former patient or supplier. This is particularly relevant for GPs where patients choose to change practices to stay with their usual doctor.

There is limited case law about patients seeking out doctors in this way.

A court may find a clause like this is not reasonable and against public policy because it  tries to stop patients from choosing to follow you to a new practice. It also tries to stop you from accepting them as patients, even though you  are not allowed to active steps to encourage a patient to move with you.

We strongly recommend you ask for this part of the clause to be deleted.

Non-recruitment clause

A non-recruitment clause seeks to stop you from recruiting the practice’s staff after you leave or encouraging staff to leave their employment or engagement with your former practice.

Courts are generally unlikely to enforce a clause that covers all staff at the practice as that would include staff you did not know when you were there.

Courts  are more likely to enforce a narrower clause, one limited to staff you knew or worked with recently (e.g. during your last 12 months at the practice), or if you have confidential information about the staff member e.g. their pay.

Always read the clause carefully to check whether it stops you from recruiting staff who approach you independently for a role.

General

A practice may try to enforce a restraint clause if you work in a way that breaches the clause, including by obtaining a court order to stop you from working in a competing practice. This is likely to cause you a great deal of stress, and result in significant legal costs and inconvenience.

If you do leave a practice and have a restraint of trade clause in your contract, consider your next employment or engagement carefully and seek to comply with the requirements of the clause.

Restraint clauses can be very complex.  You need to be comfortable that you can live with any restrictions once your engagement ends.  If you are not comfortable with the restrictions or do not understand the clauses in the contract, seek legal advice before you sign the contract or lease any premises.  If you have already signed a contract, seek advice before doing anything that may breach a restraint clause in your contract.

The Commonwealth government is progressing reforms to the law relating to restraint clauses, with reforms due to take effect from 2027. Submissions have been invited to the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026.