Non-compete clauses are conditions in employment contracts that restrict a worker from moving to a competitor after they leave their job.
The Albanese Government has now drafted legislation to ban this post-employment restraint, which will amend the Competition and Consumer Acts cartel framework as well as the Fair Work Act. This legislation will only be applicable for Australian workers earning under the high income threshold, which is currently $190,100 per year.
For employers, this proposed ban can seem unnecessary, with the potential for problematic consequences.
It is viewed that the legislation, if passed, could prevent employers from investing in staff training and development skills if they have no reasonable capacity to prevent employees from taking those newly acquired skills directly to a competitor.
Whilst the Government has ruled out prohibiting clauses which prevent employees from disclosing confidential information, it will not sufficiently provide practical protection for an employer whose former staff member moves to a competitor.
In addition to the ban of non-compete clauses, the legislation will also prohibit businesses from making and/or giving effect to no-poach agreements and wage-fixing agreements. This will be implemented by extending the existing cartel framework in Part IV of the Competition and Consumer Act.
These proposed bans will only apply to arrangements that relate to existing, former or future employees, not independent contractors.
The explanatory statement says that these proposed changes will support the use of proportionate and targeted options to protect legitimate business interests, including confidentiality clauses or appropriately drafted non-disclosure agreements.
If passed, the Bill will take effect on 1 January, 1 April, 1 July or 1 October in 2027, dependent on whichever comes first after the day it receives Royal Assent.
Employers that ignore the new Fair Work Act provisions will face penalties of up to $21,840 or up to $218,400 for severe breaches.
Submissions are invited and can be made online to The Treasury until 2 October 2026.
If you would like more information on what these proposed bans may mean for you and your business, or how to approach such a ban, contact us via the link below.