Non-Competes: What’s Proposed to Change
The Federal Government has released an exposure draft of the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026, which proposes to ban non-compete clauses for lower-paid employees and outlaw 'no-poach' and 'wage-fixing' agreements between businesses. Pitched as a reform to boost wages, job mobility and productivity, the proposed reforms – if passed – would change how businesses can protect themselves in 2027.
Why It Matters
In essence, if it is passed, employers will no longer be able to include a non-compete clause in employment contracts for employees earning at or below the high-income threshold (i.e. $190,100 for the 2026–27 financial year).
Co-worker non-solicitation clauses (i.e. restrictions on recruiting former colleagues) will be banned for all employees, irrespective of income.
For employers, this means the standard restraint clause in most employment contracts will likely no longer be enforceable – and even including one after the commencement date (which is still not determined but is flagged as being in 2027) may result in fines.
What We Know So Far
The Bill is still in exposure draft form, so it may change considerably between now and being passed, however the key features at the moment include:
Bans applying to contracts, deeds, workplace policies and other employment arrangements, as well as Modern Awards and Enterprise Agreements;
Civil penalties of up to 600 penalty units for serious contraventions (five times that for companies) – even if the employer never tries to enforce the clause;
Penalties for enforcing or threatening to enforce a non-compete that has stopped having effect because the employee's earnings have fallen to or below the threshold; and
The changes commencing sometime in 2027, with a proposed six-month grace period before penalties apply.
Are There Exceptions?
Yes. The following are currently not caught by the ban:
Appropriately drafted confidentiality and non-disclosure clauses;
Restraints in sale of business and shareholder agreements, which sit outside the employment relationship;
Retention arrangements, such as deferred bonuses; and
Longer agreed notice periods, including paid gardening leave.
NB: These carve-outs only apply where the clause does nothing more – a confidentiality clause so broad it stops the employee working for a competitor, or a bonus clawed back if they join one, will still be treated as a non-compete.
For employees above the threshold, non-competes will still be permitted. However, every post-employment restraint will need to be reasonable and necessary to protect confidential information or client relationships. Maintaining a stable workforce will no longer be a legitimate interest, and cascading clauses (e.g. 12, 6 or 3 months) will render the entire restraint void. Earnings are also tested on an ongoing basis – if the indexed threshold overtakes the employee's pay, the non-compete falls away, including when they resign.
What About Existing Contracts?
Existing restraints will continue to apply – unless the employment arrangement is varied on or after commencement of the new laws.
NB: Any variation will trigger the new rules, even if it has nothing to do with the restraint (e.g. a promotion or change in role).
What About No-Poach Agreements Between Businesses?
The Bill also amends the Competition and Consumer Act 2010 (Cth) so that agreements between businesses not to hire each other's staff, or to fix or cap wages, are treated as cartel conduct – attracting both civil and criminal penalties. There are narrow exemptions, including for joint ventures, secondments and labour hire, which generally limit no-poach restrictions to three months after the placement ends and require written notice to, and consent from, the affected employee.
What Should Businesses Do Now?
It is too early to start doing anything significant (as the Bill will likely change between now and receiving royal assent) – however we recommend that you:
Consider your business’s approach to departing employees, and the actual risks involved with employees leaving;
Consider whether there are other protections you may want to start using in anticipation of wider changes (i.e. longer notice periods, stronger confidentiality clauses, bonus payments staggered after termination etc.), rather than simply relying on restraints;
Review your employment contract precedents to reflect the above decisions (and ensure they all have strong confidentiality provisions); and
Monitor the Bill as it progresses to ensure that your business stays ahead of the changes.
Need Help?
Our Employment + Workplace Relations team can provide you with practical guidance on how to navigate these and other looming changes – including auditing existing restraints and updating employment contract precedents and confidentiality provisions. Please reach out to the team via hello@lawsquared.com.
