The Australian government has just released a draft law that would ban non-compete clauses for workers who earn less than $190,100 per year. This change is expected to impact over three million employees and thousands of businesses, which will likely need to review their employment contracts.
What the draft legislation actually proposes
The Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 targets clauses that stop workers moving to a better-paying job or rival business after they leave an employer. The government argues these clauses can suppress wages and limit labour mobility, pointing to research from the e61 Institute that found roughly one in five Australian workers is currently subject to a non-compete clause. Beyond the core ban, the draft legislation also targets non-solicitation clauses, which prevent former staff from headhunting old colleagues, along with no-poach agreements between businesses and anti-competitive wage-fixing arrangements. Public consultation on the bill runs until 2 October.
Employer groups have raised concerns about the scope of the changes. Innes Willox, Chief Executive of the Australian Industry Group, argued the $190,100 threshold would sweep up employees who handle sensitive commercial information despite earning below that figure. "There are many employees earning below $191,100 who are engaged in roles involving access to commercially sensitive or otherwise confidential information," he said, pointing to sales staff and those preparing commercial tenders as examples. Willox also warned the reforms could discourage employers from investing in staff training, arguing the change "will undermine our competitive position internationally."
What businesses should do now
Gazelle Kalk, Associate Director of Content and Training at Peninsula Australia, says the proposed reforms could prompt a broad review of employment documentation across the market. "The Federal Government's proposed ban on non-compete clauses for workers earning less than $190,100 per year could require thousands of Australian businesses to review their employment contracts," Kalk said. "The reforms may significantly change how employers protect their commercial interests, business assets, retain talent, and manage workforce mobility."
Kalk says many businesses have let their contracts sit untouched for years, and the consultation period is a natural prompt to revisit them. "The consultation period should also serve as a timely reminder for employers to review their employment contracts and workplace policies. Many organisations have not revisited their employment documentation for several years, and understanding the potential impact of these reforms now will place businesses in a stronger position should the legislation proceed."
Beyond non-competes
Kalk stresses that non-compete clauses are just one of several tools available to protect a business, and losing them wouldn't leave employers unprotected. "Importantly, non-compete clauses are only one tool available to employers. Businesses should not assume they will be left without protection. Well-drafted confidentiality provisions, intellectual property protections and other contractual safeguards can still play an important role in protecting commercially sensitive information."
Smaller businesses in particular are likely to be watching the consultation closely, Kalk says. "Small businesses, in particular, may be concerned about the potential loss of key employees to competitors or the movement of valuable client relationships. As the consultation progresses, employers will be looking for clarity around the proposed exemptions, safeguards and alternative protections available where there is a genuine business need."
She argues the debate shouldn't be reduced to a simple yes-or-no on non-competes. "Ultimately, the discussion should not focus solely on whether non-compete clauses are retained or removed. The broader question for employers is how to attract, retain and protect talent in an increasingly competitive labour market."