The Australian Government has introduced the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026, which proposes significant changes to restraint of trade provisions in employment contracts.
The Bill would amend the Fair Work Act 2009 (Cth) by prohibiting non-compete clauses for employees earning at or below the high-income threshold (currently $190,100 per annum, indexed annually) and banning co-worker non-solicitation clauses altogether. These reforms are intended to improve job mobility, competition and productivity. If enacted in its current form, they will significantly affect how employers protect their business interests following an employee’s departure.
What Are Restraint of Trade Clauses?
Restraint of trade clauses are commonly included in employment contracts to protect confidential information, customer relationships and workforce stability. They generally take three forms:
- Non-compete clauses, which prevent employees from working for or establishing a competing business;
- Client non-solicitation clauses, which restrict employees from approaching or taking clients; and
- Co-worker non-solicitation clauses, which prevent employees from encouraging colleagues to leave.
Which Restraints Will Remain Enforceable?
Under the proposed reforms, non-compete clauses and co-worker non-solicitation clauses will be largely unenforceable for employees earning at or below the high-income threshold. The Bill proposes a statutory right for covered employees to be free from non-compete terms.
Client non-solicitation clauses are expected to remain permissible where they are reasonably necessary to protect legitimate business interests, such as client connections developed through the employment or confidential information, and do not contain prohibited cascading restraint provisions.
What Happens to Existing Employment Contracts?
If enacted, employers who enter into employment arrangements containing prohibited non-compete terms may face substantial civil penalties, and the offending restraints will cease to have effect.
The reforms will apply immediately to new employment arrangements upon commencement. Existing employment contracts will generally continue to operate unless they are amended or varied, such as through changes to remuneration, duties or other employment terms.
Why Should Employers Be Concerned?
Employers will have a six-month transition period before civil penalties apply. Nevertheless, the reforms are expected to have a particularly significant impact on small and medium-sized businesses, which often rely heavily on customer relationships and workforce stability but may be unable to pay employees above the high-income threshold.
Businesses should therefore review their employment contracts and post-employment restraint provisions now to assess whether alternative measures, such as strengthened confidentiality obligations and carefully drafted client non-solicitation clauses, may be required to protect legitimate business interests.
What Should Employers Do Now?
While the Bill has not yet become law, businesses should begin reviewing their employment arrangements and restraint provisions. Early preparation will place employers in a stronger position to adapt if the proposed reforms are enacted and help ensure that confidential information, customer relationships and key business interests continue to be adequately protected.
