Proposed Ban On Non-Compete Clauses.

The Australian Government has released draft legislation proposing to ban non-compete clauses for employees earning below the Fair Work Act high-income threshold, currently $190,100 a year.

The proposal has immediate relevance for businesses that use employment restraints as part of their standard contracts. It also matters to employees who may have signed a clause restricting where they can work after leaving a role.

This is not yet law. Consultation is open until 2 October 2026 and the Government has indicated that reforms are intended to take effect in 2027, subject to legislation passing Parliament. The detail may change before then.

A non-compete clause is a post-employment restraint that seeks to prevent a former employee from working for a competitor, starting a competing business, or undertaking specified work for a period after they leave.

Such clauses can be drafted by reference to time, geography, particular clients, competitors or services. In Australia, they have traditionally been assessed under the restraint of trade doctrine. A restraint is generally unenforceable unless it goes no further than reasonably necessary to protect a legitimate business interest.

That assessment can be difficult in practice. A clause may be drafted broadly, but its enforceability often only becomes clear when someone is preparing to leave or the business seeks to enforce it. Sound judgement at the point of drafting is important because a restraint that reaches further than the interest it is intended to protect may offer little practical protection and may be unenforceable.

Under the draft reform announced on 7 September 2026, non-compete clauses would be prohibited for Australian workers earning below the Fair Work Act high-income threshold. On the Government’s announcement, that threshold is $190,100 per year.

The proposal forms part of a broader reform agenda aimed at reducing restrictions on worker mobility. The Government is also consulting on:

• co-worker non-solicitation clauses;
• no-poach and wage-fixing arrangements between businesses;
• cascading restraint clauses; and
• exemptions and safeguards for legitimate business interests.

The final legislation will ultimately determine the precise scope of the ban, how it applies to existing contracts, the treatment of high-income employees and any exemptions.

The proposed ban is directed at non-compete clauses. It does not mean that every provision protecting a business after an employee leaves will disappear.

Confidentiality obligations, intellectual property protections and appropriately tailored client non-solicitation provisions are distinct from a restraint preventing someone from taking a new job. Treasury identifies these as different forms of post-employment protection. Whether a particular clause remains valid will depend on the final legislation and the wording used.

For many businesses, the more useful question is not how broadly an employee can be restricted. It is what the business genuinely needs to protect. That may include confidential information, trade secrets, customer relationships developed through the role, intellectual property or the orderly transition of a senior employee.

There is no need to rewrite every employment contract before the legislative position is final. There is, however, a sensible opportunity to review current arrangements.

Start by identifying the contracts that contain post-employment restraints. Consider which employees are subject to them, whether the clauses are used as a standard provision, and what legitimate interest each clause is intended to protect.

Businesses should also review the protections that operate during employment. Clear confidentiality expectations, sensible access controls, well-managed customer information and appropriate intellectual property provisions can often provide more practical protection than a broad non-compete clause.

For senior and high-income employees, the final legislation is likely to preserve some scope for restraints. Until the exposure draft has been fully considered, businesses should avoid relying on assumptions about those categories, and seek appropriate advice if a restraint is important in protecting their interest.

Employees should not assume that a non-compete clause has ceased to operate. The announcement is a proposed future reform, not a present change to existing law.

Anyone considering a move to a competitor, establishing a new business or contacting former clients should obtain advice on the contract they signed and the circumstances of their departure. Duties relating to confidential information, client solicitation and intellectual property may apply even where a non-compete clause is ultimately not enforceable.

Employment restraints are often treated as routine contract terms. The proposed reforms are a reminder that effective protection starts with understanding the business, the role and the risk involved.

Businesses that take a considered approach will be better placed to protect valuable relationships and information while remaining responsive to legal change. That is where sound judgement matters: applying the law in a way that supports the commercial objectives of the business.