HR News · 8 September 2026
Non-Compete Clauses Are Being Banned: What the Draft Legislation Means for Employers
Draft legislation released on 7 September bans non-compete clauses for workers earning under $190,100 from 2027, with three more restraint types under review. Most employment contracts contain at least one of them. Here is what each clause does, what survives, and what to fix before the law lands.
In this article
On 7 September 2026 the Federal Government released draft legislation banning non-compete clauses for workers earning under $190,100 a year. Several other restraint clauses are under review at the same time. If your employment contracts contain restraints, and most do, they will need updating before the changes take effect in 2027.
Key takeaways
- Non-compete clauses are banned for employees earning under $190,100, the Fair Work Act high-income threshold, from 2027.
- Co-worker non-solicitation, no-poach, wage-fixing and cascading restraint clauses are all under consultation for banning too.
- Confidentiality clauses survive, and restraints remain available for employees above the threshold.
- Most non-competes were already unenforceable at common law. The ban removes the uncertainty that made them work anyway.
- Consultation closes 2 October 2026. The ban applies from 2027.
- Protection shifts from post-employment restraints to policies, information controls and disciplined exits.
What was announced
Draft released 7 Sep 2026 Consultation to 2 Oct 2026
The draft legislation bans non-compete clauses for employees earning under $190,100 per year, the Fair Work Act high-income threshold. The ban is set to apply from 2027.
The Government’s reasoning: about one in five Australian workers, more than three million people, are subject to a non-compete clause. Research from the e61 Institute found these clauses hold down wages, restrict job mobility and reduce productivity. The same research estimates a ban could lift affected workers’ wages by up to four per cent, around $2,500 a year for a typical worker.
Employment and Workplace Relations Minister Amanda Rishworth said non-compete clauses “drag down wages, handcuff workers, and put a handbrake on labour productivity.”
The four clause types under review
1. Non-compete clauses
A clause preventing an employee from working for a competitor, or starting a competing business, for a set period after leaving. Usually defined by time (3, 6 or 12 months) and geography (a radius, a city, the whole country).
Example: a hairdresser in Parramatta signs a contract saying she cannot work at any salon within 10km for 12 months after leaving. She is offered a senior role two suburbs over paying $15,000 more. The clause stops her taking it, or makes her believe it does.
That last point matters. Most non-competes were already unenforceable at common law unless they were reasonable and protected a legitimate business interest. Courts have struck them down for decades. Employees rarely know that, so the clause works through uncertainty rather than law. The ban removes the uncertainty. Under $190,100, the clause is void.
The Government’s examples are childcare workers, tradies, receptionists and hairdressers. But plenty of workers under the threshold hold genuinely sensitive roles: salespeople with client relationships, staff preparing commercial tenders, employees with access to confidential production processes or business plans.
2. Co-worker non-solicitation clauses
A clause stopping a departing employee from recruiting former colleagues to a new employer or a new venture.
Example: an engineer leaves a construction firm to start his own contracting business. His contract says he cannot approach any current employee of the firm for 12 months. Two former teammates want to join him. The clause prevents him from approaching them.
The Government is consulting on a full ban.
3. No-poach and wage-fixing arrangements
These operate between businesses rather than between employer and employee. A no-poach arrangement is an agreement between companies not to hire each other’s staff. Wage-fixing is an agreement between competitors to cap or coordinate pay.
Example: two labour hire firms in the same regional town agree not to recruit each other’s workers and to hold hourly rates at the same level. Workers in that town lose their leverage. There is nowhere to move and no competition on pay.
Franchise example: a franchise agreement stops one franchisee from hiring staff away from another in the network. The worker never signed the restriction, but their mobility is limited by it anyway.
The Government is consulting on banning both.
4. Cascading restraint of trade clauses
A drafting technique where the contract stacks multiple fallback restraints: 12 months, or 6 months, or 3 months; Australia-wide, or state-wide, or a 10km radius. If a court strikes out the widest version, the next one down survives.
Example: a contract restrains a sales manager for (a) 24 months, or (b) 12 months, or (c) 6 months, across (a) Australia, or (b) NSW, or (c) 25km from the office. Nine possible combinations. The employee cannot tell what actually binds them.
The Government is consulting on banning cascading restraints entirely.
What stays
Confidentiality clauses remain. Clauses preventing employees from disclosing confidential information are not being removed. Worth noting, though: confidentiality clauses are difficult to enforce on their own once a former employee moves to a competitor.
Non-competes above the threshold remain. The Government accepts that highly paid workers have real bargaining power when negotiating contracts. Restraints for employees earning above $190,100 stay available, subject to the usual reasonableness tests.
Exemptions are on the table. The consultation covers carveouts to protect legitimate business interests. Where those exemptions land will decide how much practical protection employers keep, regardless of an employee’s earnings.
The employer position
Employer groups argue the ban is unnecessary because unfair non-competes were already unenforceable, while reasonable ones served a purpose. The central objection is that $190,100 is an arbitrary line. A tender manager on $150,000 can hold more commercially sensitive knowledge than an executive on $250,000. Restraints also protect the investment businesses make in training staff and reduce the risk of losing a team and its clients at once.
Submissions close 2 October 2026. Employer groups will push for exemptions during consultation, but the direction is settled. Non-competes for most of the workforce are going.
The blunt version
The era of protecting the business with a scary clause nobody could enforce is over. Protection now comes from clear obligations during employment, tight information controls and well-run exits.
What HR Command is doing
Contracts updated when outcomes are final
On legislation passing
Every employment contract template in the HR Command library will be updated to match the legislated outcomes as soon as they are confirmed. Restraint clauses that are void under the new law will be removed or redrafted. Our contracts are developed with Cowell Clarke Commercial Lawyers, so every update is legally reviewed before it reaches you.
New high-income contracts
In development
We are adding a contract suite for employees earning above the $190,100 threshold. These retain enforceable restraint provisions for the roles where it still matters: executives, senior sales leaders and specialists with access to trade secrets. Restraints in these contracts are drafted to satisfy the reasonableness test rather than relying on cascading fallbacks.
Policies that replace the restraint
Most live in the library now
If a non-compete can no longer protect the business, the protection has to come from somewhere else. Most of these policies are already in the HR Command library, ready to roll out today. The rest are being added to round out the set.
| Policy or tool | What it protects |
|---|---|
| Confidential information and trade secrets policy | Defines what the business treats as confidential and which obligations continue after employment ends. Confidentiality clauses survive the reforms, so this becomes the primary protection. A clear policy with defined categories of information holds up far better in a dispute than a vague clause. |
| Intellectual property policy | Confirms that IP created in the course of employment belongs to the business: client lists, pricing models, processes, code, designs. Removes any argument about what a departing employee can take. |
| Conflict of interest policy | Requires disclosure of outside work, side businesses and competing interests during employment. Post-employment restraints are narrowing, but the duty of loyalty during employment is not. |
| IT, data security and acceptable use policy | Controls what can be downloaded, forwarded to personal accounts or copied to external drives. Most client data theft happens in the final weeks of employment. Access controls and monitoring provisions catch it. |
| Exit and offboarding procedure | Return of devices and documents, revocation of access on notice, a written reminder of ongoing confidentiality obligations, and a documented acknowledgement at exit. |
| Notice period and garden leave provisions | Longer notice for key roles, with the option of garden leave. The employee is paid, away from clients and away from live information while their knowledge goes stale. Garden leave is not a restraint of trade and remains available. |
| Client relationship management policy | Keeps client relationships institutional rather than personal. CRM discipline, shared account coverage and documented handovers mean one departure does not take the relationship with it. |
| Social media and professional networks policy | Clarifies ownership of business accounts and connections, including LinkedIn contacts built on company time. |
| Training cost recovery agreements | Where the business funds significant training or certifications, a repayment agreement that reduces over time protects the investment without restraining anyone’s employment. |
What employers should do now
| What to do | Why it matters |
|---|---|
| Audit your contracts | Find every restraint clause in every template and every signed contract for staff under $190,100. Know your exposure before 2027. |
| Do not remove anything yet | Plan for the ban as the baseline, but wait for the final form of the legislation before changing signed contracts. |
| Make a submission | Exemptions and carveouts are live questions in the consultation. If your business has a genuine protection problem, say so before 2 October. |
| Move protection into policy | Confidentiality, IP, IT security and offboarding frameworks work regardless of the final legislation. Most are in the HR Command library now. Roll them out before the ban forces the issue. |
| Review notice periods for key roles | Notice and garden leave are not restraints of trade. For senior and client-facing roles they may become your most reliable protection. |
Non-compete ban FAQ
When does the non-compete ban start?
The draft legislation applies the ban from 2027. Consultation runs until 2 October 2026, then the legislation needs to pass Parliament. The exact commencement date will be confirmed in the final Act.
Who does the ban apply to?
Employees earning under $190,100 per year, the Fair Work Act high-income threshold. Non-compete clauses for employees above that figure remain available, subject to the usual common law reasonableness tests.
Are confidentiality clauses being banned?
No. Clauses preventing employees from disclosing confidential information survive the reforms. They remain the primary contractual protection for business information after an employee leaves.
What is a cascading restraint clause?
A clause that stacks multiple fallback restraints, such as 12, 6 or 3 months across national, state or local areas, so that if a court strikes out the widest version a narrower one survives. The Government is consulting on banning these entirely.
Should I remove restraint clauses from my contracts now?
Not yet. The legislation is in draft and the final form may include exemptions and transitional rules. Audit your contracts now so you know your exposure, and plan for the ban as the baseline, but wait for the final legislation before changing signed contracts.
How do I protect my business without a non-compete?
Through obligations that apply during employment and at exit: confidentiality and trade secrets policies, IP ownership, IT and data controls, conflict of interest disclosure, garden leave and notice periods, and a disciplined offboarding process.
The bottom line
Most non-competes were never enforceable. They worked because employees did not know that. The draft legislation ends the ambiguity for everyone under $190,100, and the clauses around them, non-solicitation, no-poach and cascading restraints, are likely to follow.
The businesses that come out of this fine are the ones that never really relied on the clause anyway. Their protection sits in their policies, their information controls and their exits. If that is not yet you, there is time to fix it. Not much, but enough.
Are your contracts ready for 2027?
HR Command gives Australian employers legally drafted employment contracts, policies and letters, compliance training, WHS and psychosocial hazard tools, and a workplace advice line staffed by employment lawyers. Updated contracts and the high-income suite will be ready the moment the legislation is final. The policy library is ready now.
Book a demoThis article is general information only and is not legal advice. It reflects draft legislation released on 7 September 2026, which remains subject to consultation and passage through Parliament. You should obtain advice specific to your circumstances. HR Command content is developed in partnership with Cowell Clarke Commercial Lawyers.
