In September, since first announcing these plans in March 2025, the Australian Government has released the draft legislation in relation to banning non-compete clauses and other restraints through the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026.
This draft legislation has not yet come into effect, however it is within a consultation process and may be subject to changes until it is expected to operate as law in 2027.
Summary of key aspects
The key parts of this draft legislation, which propose significant changes to the use of employment restraints and competition practices in Australia, include the following:
- Non-compete clauses would be prohibited in employment arrangements for employees who have annual earnings below the high-income threshold, set by the Fair Work Act 2009 (Cth) (as of 1 July 2026, $190,100). There may be substantial penalties imposed upon employers if these non-compete clauses are included in a contract, even if they never seek to enforce it. Importantly, employers can face civil penalties if they threaten to enforce a non-compete clause that is void under the new laws.
- Non-solicitation clauses for co-workers would be banned for all employees, regardless of their earnings. Similarly to non-compete clauses, merely including these prohibited provisions in an employment contract can lead to significant penalties for employers, even if not enforced.
- The draft legislation would codify into the Fair Work Act 2009 (Cth) the existing common law principles relating to restraints of trade, including the requirement that a restraint must protect a legitimate business interest and be reasonable in its scope and duration. The commonly used cascading restraint clauses contain a range of alternative restrictions with differing levels of severity, allowing a court to enforce the most reasonable options rather than rendering the entire clause void. Under the proposed reforms, these types of clauses would become unenforceable.
- No-poach agreements and wage-fixing arrangements between businesses would be treated as cartel conduct under the Competition and Consumer Act 2010 (Cth), and any businesses engaging in these practices, subject to only limited exceptions, could face civil penalties.
- The proposed reforms remained subject to public consultation until 2 October 2026.
Practical impact
If this draft legislation is enacted, employers should review their employment contracts, restraint provisions, and, if applicable, any inter-business arrangements to ensure compliance with the new reforms and avoid the risk of facing any of the new significant penalties.
If you have any enquiries or would like assistance with reviewing or updating your employment contracts, please contact our office to speak with our employment law team.