I Survived: My MSP Contract Had a 2-Year Non-Compete
Non-compete clauses are covered in our Non-Compete Clauses guide.
I want to tell you about the contract that nearly cost me everything, and how I learned that not every clause an MSP puts in front of you is actually enforceable.
I was a senior infrastructure contractor working through a mid-size MSP in Canberra. The placement was at a federal government department — the kind of gig that MSPs fight over because the rates are decent and the contracts run long. I'd been placed there through the MSP's staffing arm. Standard arrangement: the MSP bills the client $150/hour, pays me $85, and pockets the difference. I knew the game. I'd been in it for years.
What I didn't know was what I'd signed.
The Clause
My contract with the MSP — the one between me and them, not between them and the client — had a restraint of trade clause. In plain English: if I left the MSP or if the client hired me directly, I couldn't work for that client or any related government department for two years. And there was a $50,000 penalty clause attached.
I didn't read it properly. I know, I know. But it was 47 pages of boilerplate legal text, I'd been out of work for six weeks, and the MSP's recruiter told me it was "standard." Every contractor I knew had signed something similar. It was just part of the deal.
For 18 months, I did the work. The government client was happy. Their internal IT team was stretched thin and I'd become the go-to person for their entire VMware environment. Then the CIO called me into a meeting.
"We want to bring you on directly," she said. "We're creating a permanent role. Senior Infrastructure Engineer, $110K plus super. Interested?"
Interested? I'd been paying an MSP $150/hour for my own labour and taking home $85. Of course I was interested.
The Threat
I gave the MSP my notice. Professional, polite, 30 days. The account manager called me the same afternoon.
"You can't do that," she said. "You've got a non-compete. If the client hires you, we'll enforce the clause."
I laughed. She didn't.
"I'm serious. Read your contract. Two-year restraint, $50,000 penalty. We'll pursue it."
My stomach dropped. Fifty thousand dollars. I was a contractor with $30K in savings and a mortgage in Belconnen. I couldn't afford a legal battle. And that was exactly the point.
The Fight
Know your Fair Work Rights and consult an employment lawyer if an MSP tries to enforce an unfair clause.
I called a friend who'd been through something similar. He pointed me to an employment lawyer in the city. The consultation cost me $450 for an hour, and that hour changed everything.
The lawyer read the clause and said something I'll never forget: "This clause is designed to scare you. It's not designed to survive a courtroom."
She explained that under Australian law, restraint of trade clauses have to be reasonable to be enforceable. Two years was excessive for a staffing arrangement. The $50K penalty was disproportionate. And the scope — covering not just the specific client but any "related government department" — was absurdly broad.
"A court would likely strike the whole clause," she said. "But more importantly, the MSP probably knows that. They're relying on you not getting legal advice."
She was right. When the MSP's lawyer sent me a formal letter threatening action, my lawyer responded with a brief outlining why the clause was unenforceable under common law restraint of trade principles. The letter cited Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co and several Australian cases that had struck down similar clauses.
I never heard from them again.
The Aftermath
I got the government job. The MSP did blacklist me — I never got another placement through them, and a couple of other agencies they had relationships with quietly stopped returning my calls. That lasted about two years before the industry moved on and nobody cared anymore.
The government client? They were furious when they found out the MSP had been using a restraint clause to block the hire. They reviewed their MSP contracts and added a clause requiring transparency around contractor arrangements.
What I'd Tell Others
Read every clause in your contract. Especially the restraint of trade clause. I know it's boring. I know you just want the job. But that clause is the thing that could cost you tens of thousands of dollars or years of your career.
Not all non-competes are enforceable. Australian courts apply a reasonableness test. Duration, scope, geographic reach, and the nature of the employer's legitimate business interest all matter. Two years and $50K is almost certainly not enforceable for a staffing arrangement.
Get legal advice before you panic. A one-hour consultation with an employment lawyer costs $300-500. That's nothing compared to the cost of being scared out of a job you're entitled to take.
The MSP industry relies on information asymmetry. They know you probably won't read the contract. They know you probably won't get a lawyer. That's why the clauses are there — not because they're enforceable, but because they're effective at detrence.
Document everything. Keep copies of your contract, all correspondence, and any evidence of the MSP's behaviour. If it ever does go to court — or if you want to file a complaint — documentation is your currency.
What I Learned
- "Standard" doesn't mean "fair" or "enforceable." The MSP industry normalises restrictive clauses that wouldn't survive legal scrutiny. Don't accept them just because everyone else does.
- The threat of legal action is often more powerful than actual legal action. MSPs know most contractors won't fight. When you do fight, they often back down.
- Your restraint clause is a negotiation point. If you're signing a contract and you see a long non-compete, negotiate it down before you sign. Most MSPs will adjust if they want you badly enough.
- Lawyers exist for a reason. I spent $450 on advice that saved me from walking away from a $110K job. Best money I ever spent.
- The industry has a memory, but it's short. Being "blacklisted" sounds terrifying, but the MSP staffing world turns over fast. Two years later, nobody remembered or cared.
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