Cross-Border Employee Poaching: Restraint of Trade Across UK/AU/NZ/US

Last verified: 2026-05-02

A senior engineer leaves your UK Ltd to join a US competitor and starts soliciting your Australian customers. Your AU employees follow. Which restraint of trade applies? UK common law, NSW common law, NZ ERA, or US state law (where the FTC’s 2024 ban was struck down by the Northern District of Texas in August 2024)? This guide covers the post-2024 landscape with statute / case-law citations and practical drafting.

Quick Answer (TL;DR)

• UK: restraint enforceable if (a) protects legitimate interest and (b) reasonable in scope/time/geography (Mason v Provident Clothing 1913).
• NSW: Restraints of Trade Act 1976 (NSW) — court “reads down” overly broad clauses.
• NZ: common-law reasonableness; restraint of trade typically 6–12 months in tech.
• US: state-by-state. California prohibits non-competes (§16600). FTC’s blanket non-compete ban issued in 2024 was vacated by Ryan LLC v FTC (N.D. Tex., Aug 20, 2024); the rule is currently not in force, but state-level bans (CA, MN, MN, OK, ND) persist.

Comparison Table at a Glance

Country-by-Country Deep Dive

United Kingdom — Common-Law Test

Test: Mason v Provident Clothing & Supply Co [1913] AC 724; Egon Zehnder v Tillman [2019] UKSC 32.

A restraint of trade is prima facie void as against public policy. To enforce:

1. The employer must demonstrate a legitimate proprietary interest (trade secret, customer connection, workforce stability).
2. The restraint must be reasonable in scope, geographic area, and duration as between the parties.
3. It must not be contrary to public interest.

Tillman v Egon Zehnder confirmed the “blue pencil” doctrine — courts may sever the offending part of a clause if the remainder still makes grammatical sense and reflects parties’ intention.

Typical drafting:

• Non-compete: 6 months (executive: 12 months) limited to direct competitors.
• Non-solicit: 12 months for clients dealt with in the last 12 months.
• Non-poach: 6 months of employees with whom the departing employee worked.

Garden leave alternative: keep employee on payroll but exclude from work. Usually credited against any post-termination restraint.

Source: https://www.bailii.org/uk/cases/UKSC/2019/32.html

NSW (Australia) — Restraints of Trade Act 1976

Statute: Restraints of Trade Act 1976 (NSW); common law principles in other states.

NSW is unique in Australia: courts may “read down” an unreasonable restraint to make it reasonable, rather than striking it entirely (s.4). Cascading clauses (“for 12 months, or 6 months, or 3 months — whichever is reasonable”) are commonly used.

In other states (Victoria, Queensland, etc.) common-law severance applies — the entire clause may be void if any part is unreasonable.

Test (Buckley v Tutty (1971)):

1. Legitimate interest.
2. Reasonable.
3. Not against public interest.

Source: https://legislation.nsw.gov.au/view/whole/html/inforce/current/act-1976-067

New Zealand — Common Law + ERA

Statute: Common law (Lindner v Murdock’s Garage [1950]); ERA s.4 good faith.

NZ courts apply the same Mason v Provident test. Typical durations:

• Non-compete: 3–6 months.
• Non-solicit: 6–12 months.
• Non-poach (employees): 6 months.

The Court of Appeal in Brake v Stockport Group Ltd [2017] NZCA 167 emphasised proportionality — a 12-month nationwide non-compete was struck down for a sales rep.

Source: https://www.justice.govt.nz/

United States — Patchwork of State Law

Federal landscape (post-2024):

• FTC Non-Compete Rule (April 2024) sought to ban most non-competes nationwide effective September 2024.
• Ryan LLC v FTC (N.D. Tex., 20 Aug 2024) vacated the rule. FTC appealed but the rule is not in effect as of 2026.

State landscape (2026):

Trade Secret Protection (federal): Defend Trade Secrets Act 2016 (DTSA) provides federal cause of action for misappropriation regardless of state non-compete law.

Source: https://www.ftc.gov/legal-library/browse/rules/noncompete-rule

Decision Framework / Q&A

Q1: My UK Ltd employee resigned to join a US competitor. UK non-compete or US?

Both. The UK contract’s non-compete is enforceable in UK courts against the employee for working in the UK or against UK customers. Enforcement in California, however, is unlikely because California’s §16600 voids non-competes regardless of choice-of-law, under Edwards v Arthur Andersen LLP (2008).

Q2: Can I draft a single non-compete for my AU + NZ + UK + US team?

No. State / country-specific drafting is essential:

• UK / AU / NZ: enforceable if reasonable.
• US California: void; redraft to non-solicit + trade-secret only.
• US Texas / Florida: enforceable; mirror UK approach.
• US federal: no FTC ban currently (post-Ryan).

Q3: My NSW employee took customer list to a competitor. What can I do?

Multiple causes of action:

1. Breach of restraint clause (enforceable in NSW).
2. Breach of equitable duty of confidence.
3. Breach of fiduciary duty (if executive).
4. Tort of inducement of breach.
5. Federal Privacy Act 1988 (if personal information).

Seek interlocutory injunction quickly — within days of breach.

Q4: What is “garden leave” and how does it interact with non-compete?

Garden leave: employee remains on payroll during notice period but does not attend work, has no access to systems or clients. Used to:

• Cool down customer relationships.
• Delay competition.
• Retain confidentiality.

In UK and AU, garden leave time often counts against post-termination non-compete. Drafting must be precise to cumulate or substitute.

Q5: US federal landscape — where can I rely on non-compete in 2026?

Texas, Florida, Delaware, most other states allow if reasonable. Watch for state legislation in 2026 — several states (Massachusetts, NJ) are debating new bans.

Common Pitfalls (Gyoseishoshi View)

1. UK non-compete drafted at 24 months without justification — court strikes down; “blue pencil” may save 12 months but uncertain.

2. NSW relying on state-specific cascading clause when employee moves to Victoria — Victorian common law applies different severance rule; cascading may not work.

3. NZ 12-month nationwide non-compete for a junior — disproportionate; struck down per Brake.

4. US California restrictive covenant signed under Delaware choice-of-law — California public policy overrides; clause unenforceable.

5. Choice-of-law clauses do not always control — many US states (CA, MA, NJ) ignore foreign choice-of-law for in-state employees on public-policy grounds.

6. Failing to pay consideration — NSW and some US states require additional consideration when restraint is added mid-employment (i.e., not at hire). Without it, restraint is void.

Conclusion

Cross-border restraint of trade is the most jurisdiction-specific area of employment law. A single global template fails everywhere. Draft per-country addenda: UK with Tillman blue-pencil margin, NSW with cascading durations, California with non-solicit-only, Texas with full-form restraint. Use garden leave + DTSA federal trade-secret claim as parallel layers.

MmowW Scrib🐮 produces jurisdiction-specific restraint clauses with the latest 2026 enforceability calibration built in.

Multi-Country Documents with Scrib🐮

One platform, 18 document types, 7 countries. ¥22,000/month pass — unlimited access. Start Free Preview →

Disclaimer

Legal information, not legal advice. MmowW Scrib🐮 is operated by a licensed Gyoseishoshi (行政書士) office in Japan. We are not solicitors, barristers, attorneys, avocats, or licensed legal practitioners in any jurisdiction.

Sources

• UK Tillman v Egon Zehnder [2019] UKSC 32: https://www.bailii.org/uk/cases/UKSC/2019/32.html
• UK Mason v Provident Clothing [1913] AC 724: https://www.bailii.org/
• NSW Restraints of Trade Act 1976: https://legislation.nsw.gov.au/view/whole/html/inforce/current/act-1976-067
• AU NSW Fair Trading: https://www.fairtrading.nsw.gov.au/
• NZ Brake v Stockport [2017] NZCA 167: https://www.courtsofnz.govt.nz/
• US California Business and Professions Code §16600: https://leginfo.legislature.ca.gov/
• US FTC Non-Compete Rule: https://www.ftc.gov/legal-library/browse/rules/noncompete-rule
• US DTSA 2016: https://www.uspto.gov/ip-policy/economic-research/trade-secrets
• US Ryan LLC v FTC (N.D. Tex.): https://www.uscourts.gov/