Australia’s rules on post-employment restraints may be heading for a major reset and businesses that rely on non-competes, no-poach clauses or staff non-solicitation restraints should start preparing now.
The Federal Government has released the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 (Cth) (Bill), which proposes significant reforms to the use of post-employment restraints and anti-competitive labour market arrangements in Australia. If enacted, the reforms are expected to commence in 2027.
The proposed changes go beyond the Government’s earlier announcement that non-compete clauses would be prohibited for lower-income employees. If passed, the laws would also prohibit non-solicitation clauses for co-workers and extend the existing cartel regime under the Competition and Consumer Act 2010 (Cth) (CCA) to capture no-poach and wage-fixing arrangements between businesses.
Key changes
In broad terms, the Bill proposes three key changes:
1. Non-competes banned for many employees
Non-compete clauses would be prohibited for employees earning at or below the high-income threshold under the Fair Work Act 2009 (Cth) (FW Act) (currently $190,100 per annum, subject to annual adjustment on 1 July each year). The prohibition would apply not only to employment contracts, but also to workplace policies and other arrangements that regulate the employment relationship.
2. Co-worker non-solicitation clauses banned for everyone
Co-worker non-solicitation clauses would be prohibited for all employees, regardless of earnings. These provisions commonly seek to prevent departing employees from recruiting former colleagues to join a competing business. Under the Bill, employees would have a statutory right to be free from such provisions. The Government’s position is that such provisions can inhibit worker mobility and reduce competition in labour markets. As drafted, the prohibition is broad and would apply to restrictions on recruiting existing or former workers associated with the employer, including contractors, labour hire personnel and other workers who have performed services for the business.
3. No-poach and wage-fixing arrangements brought into cartel territory
The Government proposes to expand Australia’s cartel laws to prohibit no-poach and wage-fixing arrangements between entities. In broad terms, this would bring certain labour market agreements within the existing cartel framework, exposing businesses and individuals to potentially significant civil and criminal consequences where they make or give effect to arrangements that restrict employee mobility or fix, control or maintain wages or other employment conditions.
The transitional provisions are nuanced. Some restrictions apply to arrangements entered into or varied after commencement, while others may affect existing terms from commencement, particularly where a party seeks to give effect to, or enforce, a prohibited provision.
The proposed ban on non-compete clauses
The key reform is the proposed prohibition on non-compete clauses for employees whose annualised full-time equivalent earnings do not exceed the high-income threshold. The Bill defines a non-compete term broadly as a term or condition that restricts, prohibits or prevents an employee from obtaining future employment or being involved in another business after their employment ends.
Notably, the reforms focus on the existence of the clause itself, rather than whether it is ultimately enforced. The Bill would prohibit employers from entering into arrangements containing banned non-compete clauses and would impose civil penalties for doing so. Employers may also face penalties if they seek to enforce, or threaten to enforce, a clause that has become ineffective under the regime.
The proposal marks a significant departure from the current position, where restraints are generally assessed according to common law principles and may be enforceable where they protect a legitimate business interest and are reasonable in scope and duration.
The exposure draft is also intended to create a more comprehensive federal regime for employment restraints, which may significantly alter the current interaction with the NSW restraint of trade framework, particularly for employers and employment arrangements covered by the national workplace relations system.
What protections remain available?
The Bill does not eliminate all forms of post-employment restraints, particularly for high-income earners or in certain contexts, such as non-compete terms in a sale of business agreement or in a shareholder agreement.
Confidentiality obligations and properly drafted non-disclosure provisions remain permissible, provided they are genuinely directed at protecting confidential information and are not drafted so broadly that they effectively prevent a person from obtaining future employment. Garden leave provisions and agreed notice periods are also expressly preserved. Similarly, retention arrangements that provide incentives for employees to remain with a business are not prohibited simply because they encourage employee retention.
Businesses will need to rely less on preventing employees from moving roles, and more on protecting the assets that matter: confidential information, intellectual property, customer relationships, notice obligations and retention incentives.
The Bill also proposes restrictions on cascading restraint provisions. Businesses should review whether existing cascading clauses remain permissible, including for restraints that are otherwise intended to survive the reforms.
What about contractors?
The proposed amendments are intended to address the treatment of employees and employment relationships, noting that existing cartel provisions in the CCA can apply to contractors. However, the co-worker non-solicitation provisions are broader because they can cover restrictions on recruiting contractors, subcontractors, labour hire personnel and others who have performed work for the employer. Separately, the proposed CCA amendments may affect business-to-business arrangements that restrict the recruitment, solicitation or hiring of another party’s employees, or that fix, control or maintain wages or employment conditions.
New risks under competition law
The Bill proposes to expand the existing cartel provisions in the CCA to prohibit no-poach and wage-fixing arrangements between entities. This is significant because those arrangements would be treated as cartel conduct, rather than merely as employment restraint issues. The Bill also includes specific exceptions, including for certain joint ventures, secondments, labour hire arrangements and conduct permitted or approved under industrial laws, although those exceptions are subject to detailed conditions and should not be assumed to apply.
That shift is particularly important for franchisors, franchisees, retailers, service providers and labour hire users, where workforce-related restrictions can appear in commercial documents rather than employment contracts. Arrangements that were previously treated as routine risk-management tools may now attract much closer scrutiny and, in some cases, significant cartel-law exposure.
Organisations should therefore review existing commercial arrangements now to identify workforce-related restrictions that may need to be amended if the reforms are enacted.
Penalties for non-compliance
Employers that include prohibited non-compete or co-worker non-solicitation terms in employment arrangements, or seek or threaten to enforce a prohibited non-compete term, may face civil penalties, with higher penalties available for intentional or reckless contraventions. Separately, no-poach and wage-fixing arrangements that are brought within the CCA cartel regime may expose businesses and individuals to the existing civil and criminal consequences for cartel conduct.
What should businesses do now to prepare?
While the Bill remains subject to consultation and may change before it is enacted, businesses should begin assessing the potential impact of the reforms and consider:
- reviewing standard employment agreements and template restraint provisions;
- identifying employees who may fall below the high-income threshold;
- auditing co-worker non-solicitation provisions and any restraints affecting contractors, labour hire personnel or other workers;
- reviewing confidentiality, intellectual property, notice and retention arrangements to ensure they protect key business assets; and
- reviewing franchise, labour hire, outsourcing, services and other commercial agreements for no-poach, hiring or wage-related restrictions.
Looking ahead
The proposed reforms represent one of the most significant shifts in Australian restraint of trade law in decades. While the final form of the legislation remains uncertain, the direction of the reforms is clear: the Government intends to promote employee mobility and increase competition in labour markets.
Businesses that have historically relied on non-compete clauses and workforce-related restraints should start planning now. A proactive review will put employers, franchisors and service networks in a stronger position if the Bill is passed.
Addisons’ Employment and Workplace Relations team and Competition/Antitrust & Consumer team will continue to monitor developments and keep clients updated. If you have any queries regarding the proposed Bill, please contact a member of our team.