Restraint of trade clause and how a cascade is built

Sample clause

an employment contract between Gidgee Veterinary Clinics, a fictional group of three clinics in Dubbo, and an associate veterinarian who treats both farm and companion animals

17. Restraint 17.1 In this clause, Restraint Period means, in order of preference, 12 months, 6 months or 3 months after employment ends, and Restraint Area means, in order of preference, within 20 kilometres, 10 kilometres or 5 kilometres of any clinic at which the Employee regularly worked in the final 12 months of employment. 17.2 During the Restraint Period and within the Restraint Area, the Employee must not practise as a veterinarian in or for a business that competes with Gidgee Veterinary Clinics. 17.3 Clause 17.2 operates as a separate restraint for each combination of Restraint Period and Restraint Area, so that it creates nine restraints. 17.4 If any combination is unenforceable, it is severed and the remaining combinations continue to apply, beginning with the longest period and the widest area that is enforceable. 17.5 Nothing in this clause prevents the Employee from giving emergency treatment to an animal.

Sample wording, not legal advice.

Variants

What to negotiate

• The top rung

  Employers are tempted to start the ladder at an ambitious period and area, expecting the court to step down. Employees point out that the widest rungs still shape behaviour, because few people want to test them. A top rung the employer could genuinely justify is fairer and removes the argument that the cascade was built to intimidate.

• How many combinations

  Three periods and three areas already produce nine restraints. Ladders with dozens of combinations invite criticism that the person could never know what they agreed to. Employees commonly ask for fewer rungs, and employers gain little from more than two or three steps on each axis.

• What sits alongside the cascade

  A cascade is sometimes used in place of narrower drafting. Employees ask for carve outs, such as emergency work or unrelated roles, and for garden leave to be deducted. Employers who accept those changes usually end up with a restraint that needs fewer fallback rungs to survive.

The risk of leaving it out

A single fixed restraint that a court finds too wide is severed entirely in most states, leaving the business with no restraint at all. Omitting any restraint means the employee or seller is free to compete immediately, restrained only by confidentiality obligations and, for a seller, whatever protection of goodwill the general law implies.

How the cascade works

A court will not rewrite an unreasonable restraint in most Australian jurisdictions, but it can sever words that leave a sensible clause behind. A cascade exploits that by defining the period and the area as lists of alternatives and declaring that every combination is a separate promise. If the widest combination fails, the court strikes it out and tests the next one, until it reaches a combination that protects a legitimate interest without going further than necessary. New South Wales differs, because the Restraints of Trade Act 1976 lets a court read down a restraint to what is reasonable, so cascades matter less there, although national employers use them anyway. Courts have generally accepted cascades, while criticising those with so many steps that certainty disappears.

Employment, sale of business and the 2026 consultation

The setting changes how much a restraint can carry. In employment, the interests are confidential information and client or staff connections, and periods are usually measured in months rather than years. On a sale of business, the buyer has paid for goodwill, so longer periods and wider areas are more readily accepted. On 7 September 2026, alongside draft legislation to ban non compete clauses for workers earning under $190,100, the Government opened consultation on banning cascading restraint of trade clauses, with submissions due by 2 October 2026. That proposal is not yet law and its scope is still being consulted on, so a cascade drafted today should be reviewed again once the final legislation and any transitional rules are known.

Where it sits in a generated document

A generated agreement sets out the restraint as a numbered clause with the period and area alternatives as defined terms, so the severance sub clause can refer to them precisely. Each value is written as text rather than a blank. For documents long enough to need one, the contents list mirrors the headings exactly, which makes the restraint easy to locate.

Documents that carry this clause

Non-compete agreement template with cascading restraint clausesAn Australian non-compete lives or dies on how it is drafted, because a court will not rewrite one that reaches too far. This one restrains a senior stylist from a competing salon using three separate covenants of falling reach, from 5 kilometres for six months down to 1 kilometre for three, and pays $4,500 for them.Non-solicitation agreement for clients, staff and durationA non-solicitation agreement restrains the approach, not the work. This one lets an accounting manager join a competitor the day after he leaves, and stops him approaching the clients he handled or the colleagues he managed for twelve months, with a six month window in which he also cannot accept work from those clients.Employment contractA full time ongoing contract for an operations coordinator on $86,000 plus $10,320 of superannuation. Eleven numbered clauses, a leave table drawn from the National Employment Standards, and a notice table that scales with service.Shareholders agreement templateA veterinary diagnostics company has just taken $1.5 million from one seed fund. The founders keep 80 percent between them, so the whole agreement turns on a single number: the 75 percent consent threshold that puts the investor on one side of every decision that matters.

Questions people ask