30 September 2026
4 min read
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The Federal Government has released proposed legislation, the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026, which would insert into the Fair Work Act 2009 (Cth) (FW Act) a right for employees to be free from non-compete clauses where their earnings are equal to or below the high-income threshold ($190,100 for 2026–2027).
The definition of a non-compete clause is broader than many employers may expect and may capture provisions that require employees to repay bonuses, forfeit benefits or face financial consequences if they commence employment with a competitor. Notice periods or retention bonuses would be excluded.
If enacted, the reforms would prohibit non-compete clauses in employment contracts, deeds, workplace policies, modern awards, enterprise agreements and workplace determinations. The prohibition would apply to casual employees and pieceworkers regardless of their earnings.
Restraints contained in contracts entered into before the legislation commences, which is expected to occur in 2027, would not be affected. Reasonable confidentiality obligations or non-disclosure agreements would also be excluded.
The proposed legislation could also affect restraints that were valid when originally agreed. A non-compete clause that is enforceable because the employee earns above the high-income threshold would become unenforceable if the employee’s earnings later fall to, or below, that threshold.
The reforms would also prohibit restraints that prevent a former employee from soliciting a former colleague, regardless of their earnings. However, the new laws would not affect restraints that prevent ex-employees from soliciting clients.
Employers may face substantial civil penalties for including prohibited non-compete or co-worker non-solicitation clauses in employment arrangements. Simply including such clauses may breach the FW Act, regardless of whether they are ever enforced.
Individuals can face penalties of up to $21,840 and up to $218,400 for serious contraventions, while corporate employers could face maximum penalties exceeding $1 million in some circumstances. Employers may also face penalties for enforcing, or threatening to enforce, a prohibited clause. Any prohibited clause would be unenforceable and have no effect.
Employers would still be able to use non-compete clauses for employees earning above the high-income threshold, but only where the clause is necessary to protect a legitimate business interest and is reasonable in scope and duration.
Recognised legitimate interests would be limited to protecting confidential information and/or customer, client and professional relationships. Maintaining a stable workforce would no longer be recognised as a legitimate business interest capable of justifying a restraint. This reinforces the effective outlawing of anti-poaching clauses.
The proposed laws will prohibit the use of ‘cascading’ restraint clauses containing multiple alternative time periods or geographic areas.
If a restraint is drafted in a cascading manner, the entire clause would be unenforceable and courts would no longer be able to sever unreasonable alternatives and enforce the remainder. Instead, any restraint would need to be drafted with a single duration and geographic scope, and would only be enforceable where it is reasonable and reasonably necessary to protect confidential information or customer, client or professional relationships.
Separately, the proposed legislation would amend the Competition and Consumer Act 2010 (Cth) so that no-poach and wage-fixing arrangements between employers would be treated as cartel conduct. This could expose businesses and individuals to significant civil penalties and potential criminal liability.
Although the proposed legislation is not yet law and may change, it signals a significant shift in the regulation of post-employment restraints. Employers should take this opportunity to review their existing arrangements and prepare for the potential impact on their employment agreements, recruitment practices and workforce retention strategies.
For now, employers should:
If you have any questions about the proposed legislation or need assistance with any restraint clauses, please get in touch with us.
A version of this article was originally published in the Employment Law Handbook by Tanda.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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