The Australian Government has released draft legislation proposing significant changes to the use of non-compete and other restraint clauses in employment contracts.
If passed, the reforms will limit the ability of employers to prevent employees from working for competitors or establishing competing businesses after their employment ends.
What is changing?
Under the proposed reforms:
- Non-compete clauses will be banned for employees earning below the high-income threshold under the Fair Work Act 2009 (Cth), currently $190,100 per year.
- Co-worker non-solicitation clauses will also be prohibited.
- No-poach agreements, where businesses agree not to hire each other’s employees, will be prohibited.
- Wage-fixing arrangements between businesses will be prohibited.
- Changes to the rules applying to other restraints, including cascading restraint clauses.
The Government says the reforms are intended to increase employee mobility and competition and address concerns that restraints can discourage employees from moving to better-paid or more productive jobs.
Are all restraint clauses being abolished?
In short, no.
The proposed reforms do not amount to a blanket prohibition on all post-employment restraints.
Other protections, including confidentiality obligations and certain client non-solicitation restraints, remain important ways for employers to protect legitimate business interests.
The reforms may therefore require employers to reconsider how their employment contracts protect confidential information, intellectual property, customer relationships and other legitimate commercial interests.
What should employers do?
Businesses that currently use restraint clauses should consider:
- reviewing their existing employment agreements;
- identifying employees who are subject to non-compete or non-solicitation provisions;
- reviewing confidentiality and intellectual property protections;
- reconsidering the use of broad or cascading restraint clauses; and
- reviewing any arrangements with other businesses relating to the recruitment or remuneration of employees.
For businesses that routinely include the same restraint clause in all employment agreements, a more tailored approach may be required if the reforms become law.
When will the changes take effect?
The reforms are not yet law.
The Australian Government released the draft Treasury Laws Amendment (Banning Unfair Non-Competes) Bill 2026 on 7 September 2026 and consultation remains open until 2 October 2026.
The Government has previously indicated that the reforms are intended to commence from 2027, subject to consultation and the legislation passing Parliament.
The final legislation may differ from the current proposal.
How can we help?
Employers should consider reviewing their employment contracts now to identify provisions that may be affected and ensure they retain appropriate protections for confidential information, intellectual property and client relationships.
Our employment law team can assist employers and employees with restraint clauses, employment contracts and the implications of the proposed reforms.
Contact our team today to discuss your employment legal options.
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