If you’re a senior executive in the mining and resources sector, chances are your employment agreement includes a restraint clause. These clauses often feel like legal fine print, until you decide to leave your role, whether due to a change in company, redundancy or to start your own consultancy. That’s when they become very real.
So, what do restraint clauses actually mean for you? And how enforceable are they under Australian law?
What Is a Restraint Clause and Why Does It Matter?
A restraint clause is designed to limit what you can do after leaving your employer, such as who you can work for, for how long the restriction applies, and in which geographical area. Employers include these clauses to protect their legitimate business interests, for example confidential information, client relationships and goodwill.
From an employer’s perspective, restraints help safeguard intellectual property and prevent competitors from gaining an unfair advantage. For executives, however, they can sometimes feel restrictive, particularly when considering your next career move.
Importantly, courts start from the position that individuals should be free to earn a living. That presumption can be overridden if the restraint is reasonable in scope, duration, and geographic reach.
This “reasonableness” test is effectively the gatekeeper. Under common law, any restraint that’s more than necessary is invalid, while in New South Wales a specific law – the Restraints of Trade Act 1976 (NSW) – places the onus on the person seeking to rely on the restraint clause to prove the clause is reasonable both in interests of the parties and the interests of the public. In practice, both approaches lead to the same question: does the clause protect a legitimate interest in a fair or reasonable way?
It’s also worth noting that restraint clauses in employment contracts are subject to a stricter approach than those found in business sale agreements and all things being equal more difficult to enforce. Courts are reluctant to prevent an individual from earning a living.
Confidentiality vs. Restraint of Trade
It’s important to distinguish between clauses that protect confidential information and those that restrict your ability to work for others. Virtually every employment contract will have a confidentiality clause (or it’s implied by law) and courts will enforce obligations that prevent you from using genuine trade secrets or poaching clients and staff. Breaching these can lead to serious consequences, including injunctions and damages. Put simply, it’s fair for employers to prevent former staff from exploiting confidential information and courts will not allow an employee to profit from the misuse of their former employer’s trade secrets.
On the other hand, clauses that stop you from working for a competitor or starting your own consultancy are scrutinised more closely. Preventing you from earning a living in your field is a big step, so the employer must prove the restraint is reasonable and necessary to protect its interests. They can’t use a non-compete just to stamp out routine competition. If they succeed in showing the clause is justified, then you have to show that enforcing it would be against the public interest.
How Do Courts Decide What’s Reasonable?
Courts look at three key factors when judging a restraint clause’s validity:
- The employer’s protectable interests
What is the company trying to shield? This could include the nature and spread of its operations, the location of clients, and the goodwill of the business. For instance, protecting a customer base in a certain mining region or guarding proprietary drilling technology can be legitimate interests. If you were involved in something that gives a competitor an unfair leg-up (say, you know the secret recipe of an extraction process or insight into future plans of the company), that’s a protectable interest that an employer may wish to legitimately protect. - Your role and responsibilities
Your seniority, client contact, and access to confidential information all influence how enforceable a restraint may be. A restraint that might be unnecessary for a junior engineer could be entirely appropriate for a Chief Technical Officer or a General Manager of Marketing. Courts will consider how integral your role was: Did you deal directly with key clients or sensitive projects? Were you part of strategic planning? The more central your role, the stronger the justification for a restraint and the more likely it is to be considered reasonable and enforceable. - The scope and duration of the restraint
The restrain must go no further than necessary to protect the employer’s legitimate interests. Both the duration (e.g. 3 months vs 12 vs 24) and the geographic reach (local vs state vs national vs global) need to be proportionate to what is being safeguarded. For instance, if a company operates solely in Western Australia, a clause restraining you across Australia may be seen as unreasonable. Similarly, while a 12-month restraint may be appropriate for a senior executive managing key client handovers, a five-year restriction will almost always be excessive.
Many restraint clauses use cascading provisions, such as multiple duration and geographic combinations (e.g. 12, 6, or 3 months across defined regions). This allows a court flexibility to enforce the most reasonable version. For example, a 6-month, state-wide restraint might be upheld even if a 12-month, nationwide restraint is not.
Ultimately, the employer must first show that the restraint is reasonable. If they meet that burden, the employee must then demonstrate that enforcing it would be contrary to public interest. This two-step analysis is fundamental and often misunderstood.
Why Senior Executives Are Most at Risk
The more senior your role, the greater the likelihood your employer will seek to enforce a restraint clause. Your responsibilities, client relationships and access to strategic information all increase the reasonableness and the enforceability of these clauses. Senior executives often have deep knowledge of trade secrets, commercial strategies and growth plans, which makes employers more inclined to restrict where you go next.
The risk of enforcement also increases if your departure is contentious, if the employer has signalled an intention to rely on the restraint, or if you plan to join a competitor. In these situations, seeking legal advice before making any career moves is particularly important.
Why This Matters for Redundancy and Consultancy Moves
If you’re facing redundancy, you might assume you’re free to move on without restrictions, after all, you didn’t choose to leave. Be careful: if your agreement includes a restraint clause, you could indeed be restricted from joining a competitor or launching your own consultancy for months, even after an involuntary departure.
Legally, a redundancy does not automatically cancel a restraint clause. Unless your employer explicitly waives the restraint in a separation agreement or policy, it remains in effect. Before making plans, seek advice – especially if your redundancy payout is significant or your next role involves similar work. In some cases, you might be able to negotiate as part of your redundancy package to shorten or remove the restraint.
Similarly, if you’re considering setting up a consultancy, make sure you understand how your restraint clause applies to self-employment. Starting your own business doesn’t automatically avoid the restraint. Many restraint clauses are worded broadly to cover working “directly or indirectly” in a competing business that includes forming your own competing venture. Ask yourself: will your new consultancy be servicing former clients? Is it operating in the same industry or region as your old employer? If the answer is yes, you’ll need to tread very carefully and seek advice.
In some cases, your new employer may be willing to negotiate your transition with your former employer especially if your new role is unlikely to breach the restraint. Open communication and legal guidance can help avoid unnecessary disputes.
What Happens If You Ignore It?
Breaching a restraint clause can lead to:
- legal letters and demands;
- Court injunctions stopping you from working for a competitor; and/or
- claims for damages.
For senior executives, this can mean months of uncertainty, legal costs, and reputational damage. In extreme cases, you may be unable to work in your chosen profession until proceedings conclude. Litigation is stressful, expensive, and disruptive, so avoid it if you can.
Practical Steps Before You Act
- Before signing an agreement: Don’t overlook the restraint clause. Seek legal advice and consider negotiate terms like the duration, geographic scope. or activities covered. It’s often easier to amend the restraint before you sign.
- Before leaving a role: Get legal advice to understand your obligations and any risks associated with your next move.
- During transition: You may be able to negotiate with your current or future employer to limit, modify, or even waive the restraint. In some cases, your new employer may assist in reaching a commercial resolution.
Early advice and proactive planning can prevent costly disputes and reduce unnecessary stress.
Navigating Your Next Move
Restraint clauses aren’t just legal jargon; they can shape your career trajectory. Whether you’re moving on due to redundancy or starting a consultancy, understanding your rights and obligations is essential. Get advice early, plan carefully, and protect your professional future. While you want to be free to pursue new opportunities, it’s crucial to respect any binding promises you made to your previous employer.
It’s worth noting that these clauses are currently a hot topic in Australia. Regulators like the ACCC have been reviewing non-compete and non-solicitation clauses amid concerns they can stifle competition and worker mobility.
If you’re considering a career move, redundancy, or consultancy, don’t leave it to chance. Contact Resources Unearthed for expert legal advice tailored to mining and resources executives. Speak with Robert Lamb today: call +61 (0)7 3007 2000 or email contact@resourcesunearthed.com.au.
For more information about Robert Lamb, please click here.
Further reading: Establishing a Consultancy Business
Resources Unearthed is a solutions hub that connects senior executives, established professionals and business owners in mining and resources with proven specialist advisers.
The information in this article is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate, we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.
