Proposed Ban on Employee Non-Compete Clauses

The Announcement

The Government, as part of its 2025-2026 federal budget, has announced its intention to ban non-compete clauses for employees earning below $175,000. The proposed ban is expected to take effect in 2027, following a period of consultation.

The policy driving these reforms stems from the belief that the over-use of trade restraints is harming job mobility, innovation and wages growth.

The full media release can be viewed here.

What isn’t affected by the announcement?

The proposed reforms do not affect non-solicitation (customer poaching) and confidentiality provisions in employment contracts. Nor do these changes impact non-compete clauses within other commercial contracts like shareholders’ agreements or business sale agreements.

Importantly, non-compete clauses should continue to operate ‘as normal’ against employees earning above the high-income threshold. This is in addition to the continuation of protections against the misuse of confidential information obtained by employees during the course of their employment.

What does this mean for business owners?

Once these reforms are in effect, employment agreements should not contain a non-compete clause for employees under the high-income threshold. While this will enable employees to move to a competitor’s business, we do not expect the reforms will limit an employer’s ability to prevent those former employees from actively soliciting (poaching) the customers and clients of their former employer.

Business owners should take the opportunity now to review their employment contracts to ensure that they contain appropriate protective measures that do not fall foul of these new reforms. This may include strengthening clauses dealing with the protection of confidential information and non-solicitation.

How we can help

Our Corporate and Commercial team is available to assist with any questions you may have regarding employment contracts and trade restraints generally. For assistance contact us.