Are employee non-competes enforceable in South Australia?
Only so far as they are reasonable. A post-employment non-compete is treated as a restraint of trade, which the courts presume is void as contrary to public policy unless the party enforcing it shows that, in the particular circumstances, the restraint is reasonable . The onus sits squarely on the employer: it must demonstrate a legitimate interest and show that the restraint goes no further than is necessary to protect that interest .
South Australia is not a per se ban jurisdiction, and it has no statute that sets fixed numeric limits on duration or area. It is a reasonableness jurisdiction built entirely on the common-law restraint-of-trade doctrine. The starting point — confirmed by the High Court in Lindner v Murdock's Garage, an appeal from South Australia — is that every post-employment covenant is presumptively unenforceable and the burden of justifying it falls on the party seeking to enforce it .
Courts apply the doctrine more strictly to employment covenants than to covenants given on the sale of a business . The Supreme Court of South Australia continues to apply the framework laid down in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co and Lindner v Murdock's Garage today. The sections that follow work through whether a court can narrow an overbroad clause, why cascading clauses matter so much, what counts as a legitimate interest, how reasonableness of scope is judged, and the open question of whether a breach can extend the restraint.
Sources for this answer
Case law · 2020-11-13
A.1 International Cleaning Services (Australia) Pty Ltd v DmytrenkoA restraint of trade is contrary to public policy and void at common law unless it is shown to be reasonable in the particular circumstances of the case.
At common law a restraint of trade is contrary to public policy and void unless it can be shown that the restraint is, in the particular circumstances of the case, reasonable.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2005-05-17
A.2 Hydron Pty Ltd v HarousThe party enforcing a restraint bears the onus of demonstrating a legitimate interest and that the extent of the restraint goes no further than necessary to protect that interest.
In any event, Hydron bears the onus of demonstrating that the restraint is to protect a legitimate interest of itself, and that the extent of the restraint goes no further than is necessary to protect that interest.
See Hydron Pty Ltd v Harous [2005] SASC 176 (Bleby J).
Case law · 1950-09-29
A.3 Lindner v Murdock's GaragePDFThe employer bears the onus of proving circumstances showing the restriction on the employee's freedom to work is reasonable.
The onus was on the plaintiff firm to prove circumstances showing that the restriction on the defendant's freedom to work was reasonable.
See Lindner v Murdock's Garage [1950] HCA 48; (1950) 83 CLR 628 (per McTiernan J).
Case law · 2020-11-13
A.4 International Cleaning Services (Australia) Pty Ltd v DmytrenkoCovenants in restraint of trade in employment contracts are scrutinised more strictly than those in contracts for the sale of a business.
A stricter view is taken of covenants in restraint of trade in employment contracts than those contained in contracts for the sale of a business.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Can a South Australian court narrow an overbroad non-compete?
Only in a limited way, and far less generously than many employers assume. South Australia has no statute that lets a court read an overbroad restraint down to a reasonable level. A court applies the common-law blue-pencil rule only: it can delete severable words if what remains is reasonable, but it cannot read down, add to, or rewrite the clause. If the restraint confers greater protection than can be justified, it is unreasonable and unenforceable , and if severance cannot save it the whole restraint fails .
The South Australian approach to severance is deletion, not editing. Where part of a restraint is invalid, that part may be severed from the balance and disregarded — an approach the Supreme Court has described in the traditional language of the blue pencil .
“In the context of these cases that approach is sometimes described as the blue pencil rule.”
International Cleaning Services (Australia) Pty Ltd v Dmytrenko is the worked example of severance actually rescuing a clause. Stanley J held that the covenant as drafted went too far, because it reached beyond working in or for a competitor to cover any indirect interest in anything that might assist a competitor — even a passive shareholding . Rather than strike the whole clause down, his Honour deleted the offending words so that what remained was a clean prohibition on being employed directly or indirectly in any competitor, and enforced the trimmed restraint for its full 12-month term. The animating idea is that the court should hold the parties to the bargain they actually struck .
The limit of the technique appears in Hydron Pty Ltd v Harous. A severance clause cannot save a covenant whose defect runs through its core: the court there refused to excise internal parts of the restraint where doing so would have left no certain covenant behind . Deletion must leave a sensible, self-contained restraint standing on its own; if it would take rewriting to get there, the covenant fails entirely.
Because a South Australian court will not read an overbroad restraint down to a reasonable level — it can only delete severable words and cannot rewrite the clause — draft scope, area, and duration to the minimum the legitimate interest actually requires . Structure the clause so that any over-reaching words can be struck out cleanly and leave a complete covenant behind; where deletion would leave no certain obligation, the whole restraint fails .
Sources for this answer
Case law · 2020-11-13
B.1 International Cleaning Services (Australia) Pty Ltd v DmytrenkoA restraint that confers greater protection than can be justified is unreasonable and therefore unenforceable.
If the Court is satisfied that the restraint confers greater protection than can be justified, the restraint will be unreasonable and therefore unenforceable.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2020-11-13
B.3 International Cleaning Services (Australia) Pty Ltd v DmytrenkoSeverance of an invalid part of a restraint, so that the balance can be enforced, is the approach sometimes described as the blue pencil rule.
In the context of these cases that approach is sometimes described as the blue pencil rule.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2020-11-13
B.4 International Cleaning Services (Australia) Pty Ltd v DmytrenkoThe covenant as drafted was cast in wider terms than necessary because it extended beyond working in or for a competitor; the court severed the offending words and enforced the remainder.
In my view, clause 10.8.1 is cast in wider terms than is necessary to protect the applicant's legitimate interests because it seeks to extend beyond working in or for a competitor of the applicant.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2020-11-13
B.5 International Cleaning Services (Australia) Pty Ltd v DmytrenkoIn applying severance to hold the parties to their bargain, the court proceeds on the footing that it should not be the destroyer of bargains.
The Court should not be the destroyer of bargains.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2005-05-17
B.2 Hydron Pty Ltd v HarousSeverance cannot be used to excise internal parts of a covenant where, without rewriting the covenants, there would be no certainty in what remained.
Even if this were possible, without rewriting the covenants there would be no certainty when any of the periods commenced.
See Hydron Pty Ltd v Harous [2005] SASC 176 (Bleby J).
Are cascading or ladder restraint clauses valid in South Australia?
Yes, within limits, and they are essential drafting in South Australia precisely because a court cannot read an overbroad clause down. A cascading clause sets out a menu of progressively narrower combinations of period and area, each expressed as a separate, severable restraint, so that if the widest is unreasonable a narrower rung can still be enforced on its own. The Full Court upheld restraints built exactly this way in Richmond v Moore Stephens Adelaide Pty Ltd , and a ladder clause supported by proper severance provisions is not void for uncertainty where it is a genuine attempt to define the protection needed .
Richmond is the South Australian anchor, and its context matters: the restraints arose from the sale of an accountancy practice together with an ongoing service agreement under which the seller continued to work in the practice, not from a bare employment contract. The service agreement restrained the principal from soliciting or dealing with clients and enticing away staff, with the restraint expressed as a cascade .
On that service agreement cascade, the Full Court found no error in the trial judge's conclusion that a two-year restraint after termination was reasonable on those facts . The business sale agreement carried its own separate cascade — four years down to one year, South Australia down to a 10-kilometre radius — which the Full Court likewise upheld at its longest rung of four years after completion. Because the restraints protected goodwill the buyer had paid for, the analysis was more generous than it would be for a covenant imposed on an ordinary employee, so the case should be read as validating the cascading structure rather than as a benchmark for employment durations.
A cascade works only if each rung is genuinely independent and severable. In Hydron Pty Ltd v Harous the court accepted that ladder clauses generated by combining variables of conduct, time and area are not void for uncertainty where the agreements state that each combination is a separate covenant and the exercise is a genuine attempt to define the protection required . The contrast is a clause that piles up combinations with no statement of priority and no separate covenants: the court in Hydron cited the warning of Wootten J that what fails in such a case is not simply an area but a total covenant whose other terms shift underfoot .
A cascading clause is the practical answer to South Australia's no-read-down rule, but only if each rung is a self-contained, reasonable restraint that the agreement expressly treats as a separate covenant . A pile of mechanical combinations with no severance architecture risks failing as a whole, because a court cannot decide what the covenant forbids when the conduct, period and area all move at once .
Sources for this answer
Case law · 2015-09-29
C.1 Richmond v Moore Stephens Adelaide Pty LtdThe restraints connected to the sale of an accountancy practice and an associated service agreement operated for cascading periods from three years down to three months within cascading areas from Australia down to 10 kilometres, and were upheld.
These restraints operate for cascading periods ranging from three years to two years and down to 3 months after termination of the Service Agreement within cascading areas ranging from Australia down to 10 kilometres from the site the Principal carries on business.
See Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147 (Blue J, Kourakis CJ and Stanley J agreeing).
Case law · 2015-09-29
C.3 Richmond v Moore Stephens Adelaide Pty LtdThe Full Court found no error in the trial judge's conclusion that a two-year restraint after termination was reasonable in the circumstances of the sale of the practice and the associated service agreement.
In the circumstances, no error has been demonstrated in the Judge's conclusion that a period of two years after termination comprised a reasonable restraint.
See Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147 (Blue J, Kourakis CJ and Stanley J agreeing).
Case law · 2005-05-17
C.2 Hydron Pty Ltd v HarousLadder clauses expressed as separate severable covenants are not void for uncertainty where they are a genuine attempt to define the covenantee's need for protection.
On their face, the clauses appear to be a genuine attempt to define Hydron's need for protection in respect of the various situations covered by the agreements.
See Hydron Pty Ltd v Harous [2005] SASC 176 (Bleby J).
Case law · 2005-05-17
C.4 Hydron Pty Ltd v HarousBleby J cited Wootten J's warning in Austra Tanks that where variable combinations are not expressed as separate covenants, what is unenforceable is not simply a restraint in respect of an area but a total covenant; Bleby J went on to distinguish that situation from the separately-covenanted clauses before him.
But it is not simply a restraint in respect of an area which is unenforceable, but a total covenant.
See Hydron Pty Ltd v Harous [2005] SASC 176 (Bleby J), quoting the warning of Wootten J in Austra Tanks Pty Ltd v Running, which Bleby J distinguished on the facts.
What legitimate interest must an employer show to enforce a South Australian non-compete?
A protectable business interest — not a mere wish to avoid competition. An employer cannot restrain a former employee simply because a rival might benefit; an employer must be prepared to face the competition of a former employee if it comes . The recognised interests are the employer's customer connection and goodwill and its confidential information; the employee's own skill, experience and know-how remain the employee's to use .
The dividing line drawn by the High Court in Lindner v Murdock's Garage — a South Australian appeal — is between protecting an asset and suppressing a rival. A covenant aimed at competition by itself, rather than at a recognised interest, is invalid .
“An employer must be prepared to face the competition of a former employee if it comes.”
The Full Court's decision in N P Generations Pty Ltd v Feneley marks the same line for confidential information. A departing rental property manager had compiled an address book of the employer's landlords from its records: because the list was confided to her for the limited purpose of doing her job, she was obliged to hand it back when the employment ended . Her work diary, by contrast, was built up from day-to-day appointments, contained material fairly described as her own general knowledge, skill and experience, and was held not to be confidential at all . The customer list belonged to the business; the working knowledge belonged to the person.
That second half of the line is just as important in the restraint context. An employer is not entitled to protection against mere competition, and a former employee is entitled to deploy the skill, experience and know-how acquired in the old job in legitimate competition with it . What can be protected is the customer connection the employee built up at the employer's expense and the genuinely confidential information the role exposed them to — in Dmytrenko the court accepted that the risk of clients simply following a well-connected former employee to a competitor was a legitimate interest supporting a non-compete, even if the employee did nothing active to draw them across.
A clause that simply bars a former employee from joining or starting a competing business, without tying the restraint to a specific protectable interest, is the weakest position, because an employer is not entitled to protection against competition as such . Identify the actual interest — the customer connection or the confidential information — and draft around it, remembering that material reflecting the employee's own accumulated skill and experience cannot be claimed back .
Sources for this answer
Case law · 1950-09-29
D.1 Lindner v Murdock's GaragePDFAn employer has no protectable interest in freedom from competition by a former employee as such and must be prepared to face that competition; only a recognised interest can support a restraint.
An employer must be prepared to face the competition of a former employee if it comes.
See Lindner v Murdock's Garage [1950] HCA 48; (1950) 83 CLR 628 (per McTiernan J).
Case law · 2020-11-13
D.2 International Cleaning Services (Australia) Pty Ltd v DmytrenkoAn employer may not protect itself against mere competition, and a former employee may use the skill, experience and know-how acquired in the former employment in legitimate competition.
An employer is not entitled to protect itself against mere competition by a former employee, and that employee is entitled to use his or her skill, experience and know-how acquired in the service of the former employer in legitimate competition.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2001-06-05
D.3 N P Generations Pty Ltd v FeneleyA customer list compiled by the employee from the employer's records for use in the business was confidential, and the employee was obliged to deliver it up on termination.
Given that the address book was compiled from the appellant's records for use in its business, the respondent was obliged to deliver up the address book once her employment had been terminated.
See N P Generations Pty Ltd v Feneley [2001] SASC 185 (Debelle J, Williams and Wicks JJ agreeing).
Case law · 2001-06-05
D.4 N P Generations Pty Ltd v FeneleyThe employee's work diary, reflecting her own general knowledge, skill and experience, was held not to constitute confidential information.
For these reasons, I do not think that the diary constitutes confidential information.
See N P Generations Pty Ltd v Feneley [2001] SASC 185 (Debelle J, Williams and Wicks JJ agreeing).
How long and how wide can a South Australian non-compete be?
There is no statutory limit; reasonableness is decided case by case on the activity restrained, the geographic area, the duration, and the employee's actual customer influence. The restraint must impose no more than adequate protection on the party it favours , it is assessed prospectively as at the date of the agreement rather than with hindsight , and an area wider than the business reasonably requires is fatal .
Because the limits are judge-made, there is no fixed ceiling to anchor a covenant, and the analysis cuts both ways. In Lindner v Murdock's Garage the High Court held a covenant void because it covered an area wider than the employer's business reasonably required . By contrast, in International Cleaning Services (Australia) Pty Ltd v Dmytrenko a statewide restraint on a senior business-development employee of a commercial cleaning company was upheld — the former employee conceded the geographic reach was reasonable, and the court found that it was.
On duration, the question for a customer-connection interest is how long it takes to break the bond between the departing employee and the clients they dealt with. In Dmytrenko the evidence showed it had taken the employee about a year to build relationships with most key clients, and client contracts generally ran for more than a year, so a 12-month restraint was the period needed to sever the connection .
Two further points shape the analysis. First, the test is what protection is adequate — anything more is over-reach . Second, reasonableness is fixed when the contract is made: it is assessed prospectively by reference to the contingencies as at the date of the agreement, not retrospectively by reference to how events actually unfolded . A clause that looks defensible against later events but was over-wide when signed is still void.
Sources for this answer
Case law · 2020-11-13
E.1 International Cleaning Services (Australia) Pty Ltd v DmytrenkoAs between the parties, a restraint must impose no more than adequate protection on the party in whose favour it operates.
So far as the parties' interests are concerned the restraint must impose no more than adequate protection to a party in whose favour it is imposed.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2020-11-13
E.4 International Cleaning Services (Australia) Pty Ltd v DmytrenkoOn the evidence, a 12-month restraint was the period necessary to sever the connection between the former employee and the customers he dealt with, and was therefore reasonable.
In the circumstances a 12-month restraint is necessary to sever the connection between the respondent and the applicant's customers with whom he dealt.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 1950-09-29
E.3 Lindner v Murdock's GaragePDFA restraint whose geographic area is wider than reasonably necessary to protect the employer's business is unreasonable and void; here the area covered was held unreasonably wide.
I think it must be held that the area was unreasonably wide.
See Lindner v Murdock's Garage [1950] HCA 48; (1950) 83 CLR 628 (per McTiernan J).
Case law · 2015-09-29
E.2 Richmond v Moore Stephens Adelaide Pty LtdThe reasonableness of a restraint is assessed prospectively as at the date of the agreement, not retrospectively as at the date of enforcement.
The reasonableness of the restraint is to be assessed prospectively as at the date of the agreement and not retrospectively as at the date of enforcement.
See Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147 (Blue J, Kourakis CJ and Stanley J agreeing).
Do paid restraints, garden leave, and fresh consideration help in South Australia?
Payment helps but is not required, and garden leave as such has not been squarely tested in the staged South Australian authorities. The Supreme Court has held that the absence of any obligation to pay the former employee during the restraint period does not, of itself, make the restraint unreasonable — payment, where it exists, simply reflects the bargain the parties struck .
The point arose directly in International Cleaning Services (Australia) Pty Ltd v Dmytrenko. The former employee argued that a 12-month restraint was unreasonable because he had no entitlement to be paid during it. Stanley J rejected the submission: while some restraints have been upheld where the employer paid the former employee through the restraint period, there is no rule running the other way .
That cuts in both directions for drafters. Paying a former employee to sit out the restraint can only strengthen the employer's position on reasonableness, because it lightens the burden the covenant places on the employee — but it does not displace the requirement to prove a legitimate interest and a no-wider-than-necessary scope. Garden leave, where the employee stays employed and paid through a notice period, would be assessed under the same reasonableness framework rather than enjoying any special validity; none of the South Australian decisions discussed here rules on a garden-leave clause as such, so its treatment should be regarded as following the general doctrine rather than as settled by local authority. For mid-employment covenants introduced after hiring, the relevant baseline is that validity is judged at the date the covenant is entered into , so a restraint added later is assessed against the circumstances then and needs its own consideration.
Sources for this answer
Case law · 2020-11-13
F.1 International Cleaning Services (Australia) Pty Ltd v DmytrenkoThe absence of an obligation to pay the former employee during the restraint period does not render the restraint unreasonable.
It does not reflect a rule that the absence of payment to the former employee during the restraint period renders the restraint unreasonable.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2020-11-13
F.2 International Cleaning Services (Australia) Pty Ltd v DmytrenkoAn obligation to pay the former employee during the restraint period generally reflects the bargain struck between the parties rather than a condition of validity.
Generally, the existence of an obligation to pay the former employee his or her salary during the period of the restraint reflects the terms of the bargain struck between the parties.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Case law · 2020-11-13
F.3 International Cleaning Services (Australia) Pty Ltd v DmytrenkoThe validity of a covenant in an employment contract is judged at the date of entry into the contract, which governs how a mid-employment restraint is assessed.
The validity of the covenant in an employment contract is to be judged at the date of entry into the contract.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
What if the employer wrongfully dismissed the employee?
It depends on the contract — South Australia's Full Court has rejected the idea that an employer's breach automatically kills the restraint. In Richmond v Moore Stephens Adelaide Pty Ltd the covenantor argued that the principle in General Billposting Co Ltd v Atkinson laid down a rule of law that a repudiating party can never enforce a post-termination restraint; the Full Court held instead that whether the restraint survives termination depends on the proper construction of the contract . An employer in serious breach can still lose the covenant — but by the route of construction and the facts of termination, not by an automatic rule.
Richmond litigated the question on facts connected to the sale of an accountancy practice and an associated service agreement, not a bare employment relationship. The covenantor contended that the covenantee's defaults — chiefly ceasing to pay interest on the outstanding purchase price — amounted to repudiation that freed him of the restraints. The Full Court applied the orthodox threshold: conduct amounts to repudiation only where a party shows itself unwilling or unable to render substantial performance , and held on the facts that the threshold was not met, so the covenantor and his company were not entitled to terminate .
Two practical conclusions follow. First, the outcome turns on who validly terminated: the Full Court construed the agreements so that the restraints would not have survived a valid termination by the covenantor for the covenantee's breach or repudiation before the agreed term had run — it was the failure of that termination on the facts that left the restraints standing . Second, the General Billposting concern still has force through construction and through equity: an injunction is a discretionary remedy, and an enforcing party's own serious misconduct will weigh against it.
South Australia's Full Court treats survival of the restraint as a question of construction rather than an automatic rule , and on the construction adopted in Richmond — a sale-and-services context, not an employment dismissal — the restraints would not have survived a valid termination by the covenantor for the covenantee's breach. By analogy, an employer that terminates abruptly — without giving contractual notice or paying in lieu — risks losing the very non-compete it wants to rely on, with the General Billposting principle reinforcing the same caution at common law. Before suing to enforce a covenant, confirm that the termination itself complied with the contract.
Sources for this answer
Case law · 2015-09-29
G.1 Richmond v Moore Stephens Adelaide Pty LtdThere is no rule of law that a repudiating party can never enforce a post-termination restraint; whether the restraint survives termination depends on the proper construction of the contract.
Mr Richmond's contention should be rejected because the question whether the restraint clause survives must depend on the proper construction of the contract.
See Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147 (Blue J, Kourakis CJ and Stanley J agreeing).
Case law · 2015-09-29
G.2 Richmond v Moore Stephens Adelaide Pty LtdConduct amounts to repudiation only if a party evinces an unwillingness or inability to render substantial performance of the contract.
Conduct only amounts to repudiation if a party evinces an unwillingness or inability to render substantial performance of the contract.
See Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147 (Blue J, Kourakis CJ and Stanley J agreeing).
Case law · 2015-09-29
G.3 Richmond v Moore Stephens Adelaide Pty LtdOn the facts, the covenantee's defaults did not justify termination, so the covenantor and his company were not entitled to terminate and the restraints remained on foot.
WKYA and Mr Richmond were not entitled to terminate the Business Sale Agreement or the Service Agreement.
See Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147 (Blue J, Kourakis CJ and Stanley J agreeing).
Does a South Australian non-compete pause or extend if the employee breaches?
This is an open question, and an employer should not assume the clock stops. No settled South Australian authority holds that a restraint period tolls — pauses and then resumes — while a former employee is in breach or while litigation runs. Validity is judged at the date the contract is entered into , which sits uneasily with a clause that purports to lengthen the restraint automatically depending on the employee's later conduct.
Because validity is fixed at the date of contract, a drafting device that extends the period by the length of any breach pushes the effective duration beyond what was assessed as reasonable at the outset, and there is no clear South Australian authority validating it. An employer that needs relief for an actual breach is on firmer ground seeking a tailored injunction or damages than relying on the clause itself to stretch the restraint. The safer assumption is that the stated period is the maximum the employer can rely on.
Do not rely on a clause that purports to extend the non-compete by the length of any breach. No clear South Australian authority validates tolling of the restraint period, and because validity is judged at the date of entry into the contract, an automatic extension risks being treated as unreasonable . Treat the stated duration as the maximum and address an actual breach through an injunction or a damages claim instead.
Sources for this answer
Case law · 2020-11-13
H.1 International Cleaning Services (Australia) Pty Ltd v DmytrenkoThe validity of a covenant in an employment contract is judged at the date of entry into the contract, which is in tension with a clause that automatically extends the restraint based on the employee's later breach.
The validity of the covenant in an employment contract is to be judged at the date of entry into the contract.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).
Do South Australian restraint rules differ for contractors and business sales?
Yes, in different directions. Restraints on independent contractors are assessed under the same restraint-of-trade doctrine as employee covenants — in Richmond v Moore Stephens Adelaide Pty Ltd the restraint sat in a service agreement between a principal and a contractor company, and the ordinary reasonableness analysis applied . Restraints given by the seller of a business, by contrast, are judged more leniently, because a buyer is entitled to protect the goodwill it paid for .
The sale-of-business leniency is long-standing and uncontroversial — it predates Lindner v Murdock's Garage and has never been in doubt, so the way the point is expressed in that case (in a judgment that dissented on the ultimate outcome) reflects settled doctrine rather than any minority view. A restraint in a sale agreement is more easily upheld than the same restraint in an employment contract , and the Supreme Court of South Australia has put the converse directly: courts in general take a stricter and less favourable view of covenants between employer and employee than of covenants between vendor and purchaser .
Richmond shows the leniency working in the covenantee's favour where employment-like and sale elements are mixed. Because the business sale agreement and the service agreement were inextricably intertwined, the court assessed the restraint in the service agreement against the whole transaction — including the goodwill the buyer had paid for — rather than as a stand-alone working-relationship covenant . But the sale label is not a blank cheque. In Hydron Pty Ltd v Harous the restraints in the business sale documents themselves were struck down because they ran from the end of the seller's later employment rather than from the transfer of the business, and so bore no real connection to the goodwill actually acquired . Substance controls over form in both directions: a sale covenant must genuinely protect the purchased goodwill, and a contractor covenant gets no extra latitude merely because the worker is not called an employee.
Sources for this answer
Case law · 1950-09-29
I.2 Lindner v Murdock's GaragePDFA distinction is drawn between a restraint in a sale-of-business agreement and a restraint in an employment agreement, with the former treated more favourably.
A distinction is drawn between a restraint upon trade included in an agreement for the sale of a business and a restraint included in an agreement with an employee.
See Lindner v Murdock's Garage [1950] HCA 48; (1950) 83 CLR 628 (per Latham CJ, dissenting as to the outcome).
Case law · 1950-09-29
I.3 Lindner v Murdock's GaragePDFA restraint is more easily upheld in the sale-of-business context than in the employment context.
The restraint is more easily upheld in the former than in the latter case.
See Lindner v Murdock's Garage [1950] HCA 48; (1950) 83 CLR 628 (per Latham CJ, dissenting as to the outcome).
Case law · 2005-05-17
I.4 Hydron Pty Ltd v HarousCourts take a stricter and less favourable view of restraint covenants between employer and employee than of such covenants between vendor and purchaser.
The courts in general take a stricter and less favourable view of covenants in restraint of trade entered into between an employer and an employee than of such covenants entered into between a vendor and a purchaser
See Hydron Pty Ltd v Harous [2005] SASC 176 (Bleby J).
Case law · 2015-09-29
I.1 Richmond v Moore Stephens Adelaide Pty LtdWhere a business sale agreement and a service agreement are inextricably intertwined, the reasonableness of the restraint in the service agreement is assessed against the overall circumstances of both agreements.
The Judge was entitled to have regard to the overall circumstances under both agreements in assessing the reasonableness of the restraint clause under the Service Agreement.
See Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147 (Blue J, Kourakis CJ and Stanley J agreeing).
Case law · 2005-05-17
I.5 Hydron Pty Ltd v HarousSale-of-business restraints keyed to the end of the seller's later employment, rather than to the transfer of the business, showed no real connection with the protection of the acquired goodwill and were invalid.
The period specified shows no real connection with the protection of the acquired goodwill of the Nu Contacts business.
See Hydron Pty Ltd v Harous [2005] SASC 176 (Bleby J).
Is a federal ban on non-competes coming to Australia?
A ban has been proposed but is not yet law, and as of June 2026 the common-law restraint-of-trade framework above still governs in South Australia . According to Australian Government Treasury material and law-firm commentary, the Government announced in the 2025–26 Federal Budget that it intends to ban post-employment non-competes for workers earning under the Fair Work Act high-income threshold (reported at around AUD $183,100), with Treasury running a consultation on the design, and the reform expected to be legislated during 2026 and to take effect from 2027, operating prospectively. Those figures and dates come from that secondary material — Treasury announcements and commentary — not from any enacted statute. Until any ban is enacted, the existing common-law framework continues to govern .
The proposal, as described in current Treasury material and law-firm commentary rather than in any enacted statute, would cover most employees earning below the high-income threshold while excluding sale-of-business covenants and restraints on higher earners. Non-solicitation, no-poach, and wage-fixing arrangements are also reported to be under consideration. None of this is in force, and the precise scope, threshold, and commencement could change before any legislation passes; the threshold figure and the 2026/2027 timeline in particular are drawn from secondary reporting and should be re-checked against the enacted text when it appears.
Because this is a future legislative matter, employers should treat the timeline and detail as provisional rather than settled. A covenant entered into now is governed by existing South Australian law; whether and how a future ban would affect existing or new agreements will depend on the enacted text and its transitional provisions.
Do not draft to a federal ban that does not yet exist. As of June 2026 no Commonwealth statute bans employee non-competes, so enforceability in South Australia still turns on the common-law reasonableness test and the blue-pencil-only severance rule . Track the proposal through to enacted legislation before changing practice, because its threshold, scope, and commencement remain proposals subject to change.
Sources for this answer
Case law · 2020-11-13
J.1 International Cleaning Services (Australia) Pty Ltd v DmytrenkoUnder the common-law restraint-of-trade doctrine that currently governs in South Australia, a restraint is void as contrary to public policy unless shown to be reasonable in the particular circumstances.
At common law a restraint of trade is contrary to public policy and void unless it can be shown that the restraint is, in the particular circumstances of the case, reasonable.
See International Cleaning Services (Australia) Pty Ltd v Dmytrenko [2020] SASC 222 (Stanley J).