Non-compete clauses on the way out – what the draft Bill means for Australian employers

The Federal Government has released the exposure draft of the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026, which proposes to ban non-compete clauses in Australia for most employees and significantly change how businesses can use post-employment restraints. The Bill proposes sweeping changes to both the Fair Work Act 2009 and the Competition and Consumer Act 2010, and businesses should start preparing now.

A non-compete clause is a post-employment restraint that restricts an employee from working for a competitor or establishing a competing business after their employment ends.

The proposed changes are not yet law, but if passed will significantly affect the way Australian employers draft and rely on post-employment restraints.

The draft Bill introduces a blanket prohibition on non-compete terms for employees whose annualised full-time equivalent earnings are equal to or less than the high income threshold (currently $190,100). Casual employees and pieceworkers will also be prohibited from being subject to non-compete terms, regardless of their earnings. A prohibited non-compete term will be of no effect and may not be enforced.

For employees earning above the high income threshold, non-compete terms will still be permitted, but only where the term is necessary to protect a legitimate interest (such as confidential information or client relationships) and is reasonable.

The Bill proposes to ban co-worker non-solicitation terms entirely, for all employees regardless of income. These are terms that restrict a departing employee from recruiting former colleagues to a new employer or venture. Such clauses will have no effect under the proposed amendments.

Employment arrangements will no longer be able to include cascading or "waterfall" restraint clauses – that is, clauses containing alternative restrictions designed to ensure at least one restriction is enforceable. For example, a clause that prohibits an employee from working within a 25km radius, or failing that a 15km radius, would be prohibited.

Under changes to the Competition and Consumer Act 2010, no-poach agreements between businesses (which prevent one business from recruiting another's staff) and wage-fixing arrangements (which fix or control employee remuneration or conditions across businesses) will be treated as cartel conduct. This carries serious consequences, including potential criminal penalties.

Limited exceptions will apply for joint ventures, secondment arrangements, labour hire arrangements and professional sporting leagues, subject to certain conditions including transparency requirements.

The Bill provides exceptions for Commonwealth, State and Territory bodies where necessary to protect national defence, national security or the integrity of government. The Minister will also have the power to make declarations exempting certain government bodies from the restrictions.

The Bill provides for commencement on the first 1 January, 1 April, 1 July or 1 October after Royal Assent. The new rights for employees to be free of prohibited non-compete terms and co-worker non-solicitation terms will apply from commencement, including to terms in existing employment arrangements. The civil penalty provisions for including prohibited terms will apply to employment arrangements entered into or established after a 6-month transitional period.

The Government is consulting on the draft legislation until 2 October.

Until the proposed reforms become law and commence, the existing law continues to apply. Non-compete and other post-employment restraint clauses may currently be enforceable where they protect a legitimate business interest and are reasonable in the circumstances.

Businesses should:

• audit existing employment contracts and restraint clauses to identify any non-compete, non-solicitation or cascading restraint provisions that may be affected by the proposed changes;
• review template employment contracts to ensure they can be updated promptly once the legislation is passed, and avoid including provisions that will become unenforceable;
• assess whether existing non-compete clauses are necessary and reasonable, particularly for employees earning above the high income threshold, as those clauses will need to meet the new statutory tests of legitimate interest and reasonableness;
• review any commercial arrangements (such as joint venture, secondment or labour hire agreements) that contain no-poach or wage-fixing provisions, as these may constitute cartel conduct under the proposed amendments;
• consider the impact on recruitment and retention strategies, particularly if your business has relied on non-compete clauses to protect its workforce and client base; and
• engage with the consultation process before 2 October to raise any concerns about the draft legislation that may be relevant to your industry or business operations.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice

Author: Erini Cakouros

Position: Lawyer

Practice: Disputes