Government Moves to Ban Non-Compete Clauses for Most Australian Workers

On 7 September 2026 the Albanese Government released draft legislation proposing to ban non-compete clauses for employees earning below the Fair Work Act high-income threshold (currently $190,100 per year).

The proposed reforms would bring significant change to the regulation of post-employment restraints in Australia with the Government arguing the reforms will improve worker mobility, wages, competition and productivity.

Background

Non-compete clauses are contractual terms used by employers to restrict employees from competing with their employer after their employment ends, usually within a specified industry, geographic area or period.

These clauses are used by employers to protect their legitimate business interests, but arguments have been made that widespread use of the clauses may restrict job mobility and competition.

Research by the e61 Institute, an economic research institute, found that at least one in five workers in Australia are bound by a non-compete clause, including lower-wage workers with relatively limited bargaining power. Around half of workers are subject to some form of post-employment restraint, such as non-compete, confidentiality, non-solicitation and non-poaching provisions.

e61 research indicates that non-compete clauses have increasingly become default terms in standard employment contracts, extending beyond senior executives and professional services roles to outward-facing and lower-paid occupations (including childcare workers, yoga instructors, clerical workers and labourers).

The Proposed Reforms

The reforms proposed by the Albanese Government are currently in draft legislation and are yet to become law. However, if enacted the reforms will substantially limit employers’ ability to rely on non-compete restraints against employees earning below the high-income threshold.

The Government’s Arguments for Change

The Government primarily relies on the prevalence study undertaken by e61 which draws a potential link between non-compete clauses and Australia’s decline in job mobility, drawing on international evidence that demonstrates the adverse effects on wages and productivity caused by restrictions in worker movement. Treasury estimates that a ban on non-compete clauses could increase the wages of affected workers by up to 4 per cent, or approximately $2,500 per year.

Further Restraints Considered

Consultation is also planned on broader reforms to other restraints including co-worker non-solicitation clauses, no-poach and wage-fixing arrangements, and cascading restraint of trade clauses (commonly known as ‘waterfall’ clauses).

Takeaways for Employers

• The Government has released draft legislation proposing to ban non-compete clauses for employees earning less than $190,100 (indexed) per year.

• While the proposed ban has not yet been enacted, employers should monitor the progress and final form of the legislation to determine its effect on existing and future employment contracts, and business development.

• Rather than relying on broad non-compete restraints, employers should seek advice on whether their legitimate interests can be adequately protected through other contractual mechanisms, including those pertaining to confidentiality and intellectual property.