Proposed Non-Compete Reforms: What Employers Need to Know

What has the Government proposed?

The Federal Government has released draft legislation that would significantly restrict the use of post-employment restraints and change how employers protect confidential information, client relationships and workforce stability.

The Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 is an exposure draft only and has not yet been enacted. However, employers should begin reviewing their contracts and commercial arrangements now. If enacted, the changes are expected to take effect in 2027. 

What is proposed?

The proposed reforms apply to a broad range of employment arrangements, including:

1. Employment contracts;
2. Deeds of release;
3. Workplace policies; and 
4. Other written or unwritten arrangements regulating the employment relationship.

Employers should not assume that moving restraint provisions into separate employment-related documents will avoid the new regime. 

Non-competes

• Non-compete clauses would be prohibited for employees earning at or below the Fair Work Act 2009 (Cth) high income threshold (currently $190,100), and for all casual employees and pieceworkers.
• A non-compete validly included in a high earner’s contract has no effect at any time the employee's earnings fall to or below the threshold, and it does not survive termination if it was of no effect immediately before the employment ended.
• Enforcing, attempting to enforce, or threatening to enforce a prohibited non-compete may constitute a contravention and expose an employer to civil penalties. 

Co-worker non-solicitation

• Non-solicitation clauses preventing former employees from recruiting colleagues would be prohibited for all employees, regardless of income. 
• The prohibition extends beyond traditional employees and may capture restrictions relating to contractors, labour hire workers, apprentices, trainees and other individuals performing work for the business. 

Remaining restraints

• Client non-solicitation clauses and permitted high-income non-competes must be both necessary and reasonable. They may only protect confidential information and relevant client, customer or professional relationships acquired through employment.
• Importantly, the reforms would significantly narrow the interests capable of supporting a restraint. Workforce stability or maintaining a stable workforce would no longer be recognised as a legitimate interest capable of justifying a restraint. 
• Cascading clauses or "ladder" restraints containing alternative periods or geographical areas that have previously been utilised to increase restraint enforceability would be prohibited and may be entirely ineffective. 

Modern awards and enterprise agreements

• Modern awards and enterprise agreements cannot include non-compete or co-worker non-solicitation terms. 

No-poach and wage-fixing arrangements

• Agreements between businesses restricting employee recruitment or coordinating pay and conditions would be brought within the cartel regime, with potential civil and criminal consequences.

The proposed prohibitions may affect a broad range of commercial arrangements, including labour hire, outsourcing, franchise, secondment and joint venture arrangements where they contain restrictions on hiring workers or coordinating employment terms. 

What would remain available for employers?

If enacted, employers may continue to use targeted confidentiality and non-disclosure obligations, intellectual property protections, retention incentives, notice periods and appropriately drafted client non-solicitation clauses. However, a confidentiality clause drafted so broadly that it effectively prevents an employee from working elsewhere may be treated as a prohibited non-compete. 

Employers are also likely to place greater reliance on longer notice periods, paid gardening leave provisions, deferred incentive arrangements, retention bonuses, equity plans and other service-based remuneration structures as alternative mechanisms for protecting commercial interests 
and retaining key employees. 

The reforms are directed primarily at employment-related restraints and generally do not affect restraints contained in genuine business sale, asset sale or shareholder arrangements. 

What are the risks?

• Civil penalties. Breaches will attract up to 60 penalty units, or 600 penalty units for a serious contravention. Mere inclusion of a prohibited restraint may be sufficient to give rise to a contravention. 
• Existing restraints may be affected. Employers should exercise caution when varying contracts after commencement. A pay rise, promotion or other contractual amendment may result in an existing restraint becoming subject to the new statutory regime, even if the variation does not relate to the restraint itself. 

What should employers do now?

We do not recommend taking any substantive action until the Bill is enacted, noting that if enacted the changes are expected to take effect in 2027. However, employers can commence reviewing their employment agreements and preparing for how the changes may impact their business.

This may include:

• Reviewing employment contract templates, deeds and workplace policies containing post-employment restraints.
• Identifying non-competes applying to employees below the high income threshold, and any co-worker non-solicitation clauses.
• Assessing whether existing restraints remain properly connected to confidential information or client relationships.
• Preparing new draft terms that replace cascading restraints with single, tailored restrictions linked to a legitimate business interest.
• Reviewing confidentiality, notice period, gardening leave and incentive arrangements as alternative protection mechanisms.
• Reviewing recruitment, labour hire, secondment, franchise, outsourcing and joint venture arrangements for no-poach or wage-fixing provisions.
• Taking care when varying existing contracts after commencement, as a pay rise, promotion or other change may bring an existing restraint within the new regime. 

Key takeaways

• The reforms would move employers away from broad restraints and towards more targeted protection of confidential information and client relationships.
• Employers are likely to place greater reliance on confidentiality obligations, client protections, notice periods, gardening leave and retention-based remuneration arrangements.
• While the draft legislation may change before enactment, an early review of employment and commercial documentation will help identify potential compliance issues and reduce the risk of unenforceable clauses or penalties

Have questions?

To discuss what this means for your business or how it may apply to your circumstances, contact our team at info@ablawyers.com.au.

If you subscribe to our Workplace Advice Line, you can contact the Advice Line directly for advice and support.