Non-compete and non-solicitation restraint clause reform looms – what employers need to know
The Federal Government has released exposure draft legislation proposing significant changes to Australia’s laws on non-compete and employee non-solicitation clauses.
The Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 would amend the Fair Work Act 2009 (Cth) (Fair Work Act) and Competition and Consumer Act 2010 (Cth) (Consumer Act), with the aim of improving employee mobility, wages, competition and productivity.
Importantly, the legislation is not yet law and remains subject to consultation. If enacted, however, the reforms could have a significant impact on how employers use restraints of trade to protect their legitimate business interests.
What is changing?
Employee non-compete clauses
The proposed reforms would significantly restrict the use of non-compete clauses for:
- employees whose annualised full-time equivalent earnings are at or below the high-income threshold;
- casual employees, regardless of earnings; and
- pieceworkers, regardless of earnings.
The proposed definition of a non-compete is broad and may capture restrictions that prevent or adversely affect an employee from obtaining subsequent employment or becoming involved in another business.
The proposed rules could apply to restraints contained in employment contracts, deeds, workplace policies and other employment arrangements.
Employee non-solicitation clauses
The reforms would also prohibit coworker non-solicitation clauses, which prevent employees from recruiting or attempting to recruit former colleagues.
Unlike non-competes, this prohibition would apply regardless of the employee’s earnings.
What about employees earning above the high-income threshold?
Employers could still use non-competes for employees earning above the high-income threshold, provided the employee is not a casual or pieceworker.
However, the restraint would need to:
- be necessary to protect a legitimate business interest;
- be reasonable; and
- be no broader than necessary to protect that business interest.
Employers should therefore not assume that a high-income employee can automatically be subject to a non-compete clause.
What are “cascading” restraint clauses?
Cascading restraints typically give an employer multiple alternative restraint periods or geographic areas – for example, a 12-month restraint, or alternatively 6-month or 3-month restraint, across different geographical areas.
The proposed reforms would prevent the use of these cascading restraint clauses.
Can employers still protect confidential information and trade secrets?
Yes. The proposed reforms would not prevent employers from protecting legitimate interests through appropriately drafted confidentiality and non-disclosure provisions.
However, labelling a clause as “confidentiality” or “non-disclosure” will not necessarily take it outside the proposed regime. A provision that effectively operates as a non-compete may still be caught by the proposed restrictions.
Are there also changes affecting agreements between businesses?
Yes. The proposed reforms would also introduce new competition rules targeting no-poaching and wage-fixing arrangements between businesses.
These provisions would generally prohibit businesses from agreeing to restrict the recruitment of each other’s employees or to fix, maintain, decrease or control employee remuneration or employment conditions.
Limited exceptions would apply to certain arrangements, including joint ventures, secondments and labour hire arrangements.
If the proposed changes are enacted, will my existing employment contracts be void?
No. The proposed reforms would not make existing employment contracts void or automatically invalidate the contract as a whole. However, if the reforms are enacted, certain non-compete or non-solicitation clauses may no longer be enforceable and may need to be reviewed (depending on the finalised legislation and circumstances of the employee).
For now, employers do not need to take any immediate action. The legislation remains in draft form and is subject to consultation.
What happens if an employer breaches the proposed rules?
Contraventions of the proposed Fair Work Act provisions would attract civil penalties, including higher penalties for serious contraventions. Employers would also be prohibited from seeking or threatening to enforce a prohibited non-compete.
Importantly, the proposed reforms could affect existing restraint clauses, meaning employers should not assume that restraints drafted before the reforms commence will remain enforceable.
What should employers do now?
There is no need for employers to make changes to their employment arrangements just yet. The proposed legislation is currently subject to consultation and is not yet law, and the final position may change before any reforms are enacted.
For now, employers should continue to monitor developments and consider the potential implications for their business.
If the proposed reforms are ultimately enacted, employers may need to consider:
- reviewing non-compete and employee non-solicitation clauses;
- reviewing confidentiality and non-disclosure provisions in employment contracts or company policies;
- identifying employees who may fall above or below the high-income threshold; and
- reviewing cascading restraints.
Learn more
If you would like advice on how these proposed reforms may affect your business, including reviewing existing restraint provisions, drafting compliant employment contracts, or ensuring your confidentiality and non-disclosure arrangements continue to protect your legitimate business interests, please contact NRA Legal on 1800 572 679 for a confidential conversation.
Contact our team today