Proposed non-compete ban moves closer

On 7 September 2026 the federal government released draft legislation to ban non-compete clauses for workers earning under the Fair Work Act high income threshold, currently $190,100 a year. Consultation closed on 2 October 2026. The ban is not yet law, but employers who use restraint clauses in their contracts should start preparing.

What is proposed

According to the government's announcement, the draft laws would:

• Ban non-compete clauses for employees earning below the high income threshold.
• Ban other unfair restraints, with the government also consulting on co-worker non-solicitation clauses, no-poach and wage-fixing arrangements between businesses and "cascading" restraint clauses.
• Include safeguards for legitimate business interests, which are being worked through in consultation.

The government cites research that around one in five Australian workers are subject to a non-compete clause, and estimates that a ban could lift affected workers' wages by up to 4%.

How restraints work today

Under current law, a post-employment restraint is presumed unenforceable unless the employer shows it is reasonable to protect a legitimate business interest, such as confidential information or client connections. Courts look at the duration, geographic area and activities restrained. In New South Wales, the Restraints of Trade Act 1976 lets courts read down an unreasonable restraint, which is why "cascading" clauses with several alternative periods and areas became common.

In practice, many non-competes in junior and mid-level contracts would struggle to meet the reasonableness test already. The proposed ban would remove the uncertainty for workers below the threshold by making the clauses unenforceable outright.

What employers can do now

1. Audit your contracts. List which roles have non-compete, non-solicitation or no-poach clauses, and which employees earn below $190,100.
2. Rely more on confidentiality and IP clauses. These protect what most businesses actually care about and are not the target of the ban.
3. Review client and employee non-solicitation clauses. The government is consulting on some of these too, so don't assume they will survive unchanged.
4. Check arrangements with other businesses. No-poach agreements with partners, suppliers or EOR providers may also be caught.
5. Plan for new contracts. Once the law passes, update templates so new hires below the threshold are not given unenforceable clauses.

Why it matters for international employers

Overseas companies often bring restraint clauses from their home country. US-style non-competes, for example, are common in some states. In Australia, they already face a high bar, and for most workers they may soon be banned entirely. If you hire through an Employer of Record, ask how the provider will update its Australian contract templates once the legislation is final.

The United States has also seen moves against non-competes, although the Federal Trade Commission's 2024 nationwide rule never took effect. See our United States to Australia guide for more on how the two systems differ.

• Australian employment law
• #restraints of trade
• #non-compete
• #employment contracts

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