In construction and insurance-related disputes, contract language can feel like background noise, until it suddenly isn’t. A clause you barely noticed when signing becomes central to whether someone can take a new role, approach a former client, or even stay in the same industry.
Non-compete and non-solicitation clauses often come up at exactly those pressure points. They sound similar. They are not. And misunderstanding the difference can complicate matters when you are already trying to resolve your construction issue in Brisbane or get legal help for property issues tied to insurance or contract disputes.
This article breaks down how non-compete and non-solicitation clauses work, where they differ, and why those differences matter in construction and insurance legal scenarios.
What Is a Non-Compete Clause?
A non-compete clause restricts a person from working for a competitor or starting a similar business for a defined period and within a specified geographic area after leaving a company. The idea is straightforward. An employer wants to protect sensitive information—pricing structures, client strategies, or operational know-how—from immediately walking across the street to a competitor.
In construction, this often arises with senior project managers, estimators, or executives who have deep insight into bids, subcontractor pricing, and long-term development plans. In insurance-related work, it may apply to professionals who understand claims strategies or policy interpretations at a granular level.
That said, non-competes are not limitless. Courts expect them to be narrow and justified. Timeframes must be reasonable. Geographic boundaries need to reflect where the business actually operates. Scope matters. A clause that tries to block someone from “any construction-related activity” is far more likely to be challenged than one tied to a specific market segment.
From a legal perspective, non-competes receive close scrutiny, particularly in employment contexts. They restrict a person’s ability to earn a living, and courts are cautious about enforcing them unless there is a clear, protectable business interest.
What Is a Non-Solicitation Clause?
A non-solicitation clause takes a different approach. Instead of restricting where someone can work, it limits who they can approach. Specifically, it prohibits soliciting former clients, customers, or employees after leaving a business.
In practice, this means you may be free to work for a competitor or start your own firm, but you cannot actively pursue clients or staff you dealt with in your previous role. In construction and insurance settings, this is often about preserving relationships rather than locking down competition entirely.
Non-solicitation clauses are common in employment contracts, contractor agreements, shareholder arrangements, and even settlement deeds. They are often seen as a more balanced way to protect goodwill without imposing a blanket ban on future work.
Core Differences Between Non-Compete and Non-Solicitation Clauses
- Scope of Restriction
A non-compete limits future work and competition itself. A non-solicitation clause limits specific conduct, such as approaching clients or staff, but does not prevent employment in the same industry.
- Employment and Career Impact
Non-competes can significantly affect career mobility. For some professionals, especially in specialised construction or insurance roles, they can feel like hitting pause on an entire career path. Non-solicitation clauses, while still restrictive, generally allow continued industry participation.
- Enforceability Considerations
Courts scrutinise non-competes more heavily because they impose broader restraints. Non-solicitation clauses are often easier to enforce, provided they are reasonable, specific, and clearly drafted.
- Typical Duration and Geographic Scope
Non-competes usually include explicit geographic limits—cities, regions, or even states. Non-solicitation clauses tend to focus less on geography and more on defined relationships or categories of clients.
Practical Examples: When to Use Each Clause
Consider a senior executive in a construction firm who has oversight of tender strategies and major infrastructure projects. A carefully limited non-compete may be appropriate to protect confidential business methods.
Now think of a sales manager or insurance broker whose value lies in personal client relationships. In that case, a non-solicitation clause often makes more sense. It protects those relationships without forcing the individual out of the industry entirely.
Contractor agreements are another common scenario. Contractors frequently move between firms, particularly in construction. Non-solicitation clauses are often preferred because they address client poaching without discouraging legitimate contracting work.
In franchise arrangements or business sales, both clauses may appear together. The buyer wants assurance that the seller will not immediately compete or reclaim clients, especially where goodwill forms a large part of the transaction value.
Legal and Enforceability Considerations
Courts typically assess restrictive clauses based on reasonableness, duration, geographic scope, and the existence of a legitimate protectable interest. These principles apply across common law jurisdictions, like Australia, though enforcement trends differ.
In construction and insurance disputes, clauses are more likely to be upheld when they are tailored to actual risks rather than drafted as catch-alls. Overreach is often what causes problems, particularly when disputes intersect with broader issues like Understanding Construction Law and Contracts or Understanding Insurance – Protecting Your Home & Property.
Pros and Cons for Employers and Employees
- For Employers
These clauses can protect market share, customer relationships, and confidential information. The downside is practical. Overly restrictive terms can deter talent and invite legal challenges.
- For Employees
Non-competes can sharply restrict opportunities. Non-solicitation clauses, while limiting client contact, usually allow continued work within the same field, which often feels more manageable in real-world terms.
Common Misconceptions About Restrictive Covenants
One common misunderstanding is that non-compete and non-solicitation clauses are interchangeable. They are not. Another is the belief that all restrictive clauses are automatically enforceable. They are not. Finally, many assume non-solicitation clauses block all future work, which is rarely the case when drafted properly.
Tips for Drafting Effective Clauses
Clear definitions matter. Who counts as a client? What does “solicit” actually mean? Clauses should be tailored to the specific role and risks involved. Broad, generic language often creates more problems than it solves. Legal review is not just a formality; it is often the difference between an enforceable clause and an expensive dispute.
Conclusion: Choosing the Right Clause for Your Business
Non-compete and non-solicitation clauses serve different purposes, especially in construction and insurance contexts where relationships and confidential information intersect. Choosing the right clause, or combination, requires careful consideration of role, risk, and enforceability.
When disputes arise, these clauses often sit alongside broader contractual and insurance issues, making informed legal guidance essential.
Contact Cochrane Leahy Litigation
If you are dealing with a dispute involving restrictive clauses, construction contracts, or insurance-related issues, Cochrane Leahy Litigation can help. Our team regularly advises clients seeking to resolve your construction issue in Brisbane or get legal help for property issues connected to contractual or insurance disputes.
Call 0421 608 459 to speak to our team and we can review your position, explain your options clearly, and help you move forward with confidence.