The clue isn’t in the name: proposed non-compete reforms reach much further

The Federal Government has released draft legislation, the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026, that proposes to:

• ban non-compete clauses for employees earning below the
  Fair Work Act 2009 (Cth)’s high income threshold, currently indexed at $190,100
  a year; and
• Ban certain wage-fixing provisions between businesses as part of expanding the anti-cartel provisions in the Competition and Consumer Act (Cth)

These proposed changes have been coming for some time. Treasury’s Competition Review began examining non-competes in 2023, the Government announced the ban in the March 2025 Budget, and a policy consultation paper followed in July 2025. What has changed is that the policy has moved from a consultation paper to a draft law.

What is a post-employment restraint?

A post-employment restraint is a contractual clause, usually contained in an employment contract or agreement, that prohibits an employee from doing one or more of the following after they leave their employment, for a set period and within a set area:

• Competing, for example, setting up a new and competing business, or working for a competitor.
• Poaching fellow employees or asking them to leave their employment.
• Poaching customers or suppliers and attempting to take key relationships with them to a new employer or into a new business of their own.

Employers have used post-employment restraints in employment contracts for decades to protect their legitimate business interests, including key relationships, personnel and operations.

Their use has broadened over time, though, often without employers asking the corresponding question: is this restraint reasonably necessary to protect the business’s legitimate interests?

Ministers have pointed to childcare workers, construction workers and hairdressers as examples of lower-paid employees currently subject to non-compete clauses.  The question in cases like these is what purpose a non-compete clause serves.

What’s being proposed

The draft legislation proposes to:

• Ban non-compete clauses for employees earning under the high-income threshold ($190,100 currently, indexed annually on 1 July).
• Trigger further consultation on other post-employment restraints, including non-solicitation of fellow employees, suppliers and customers, as well as no-poach and wage-fixing arrangements.
• Include exemptions and safeguards intended to protect legitimate business interests, which the Government has indicated may cover matters such as confidential information and trade secrets.

The reforms are intended to take effect from 2027, subject to legislation passing Parliament.

Why this matters, whatever industry you’re in

Restraint of trade clauses — non-competes, non-solicits, confidentiality restrictions — show up across almost every sector, in employment contracts drafted years ago as much as in new ones. Whether you’re in retail, health and social care, construction, professional services or hospitality, if your contracts include restraint clauses, this reform is relevant to you.

The scale is significant. ABS data indicates that almost half of Australian businesses use some form of restraint clause, with around one in five using non-compete clauses specifically, and the Government estimates more than three million workers are covered by one.

At this stage, the detail that will determine what changes for your business — exemptions, transition arrangements, how “cascading” restraints are defined — is exactly what’s out for consultation. Submissions close 2 October, and the final shape of the legislation could shift in response to that feedback.

What employers should do now

• Take it seriously, but don’t rewrite contracts yet. This is a draft, not law.
• Start locating your restraint clauses. Knowing which contracts in your suite of precedent documents include non-competes, non-solicits or restraint of trade clauses puts you in a stronger position once the final rules land.
• Watch this space for the finer detail. Once the exemptions, safeguards and transition arrangements are clearer, we’ll be able to give more specific, practical guidance, including anything industry-specific.
• Strengthen your confidential information protections. The proposed changes do not touch confidential information provisions. Strong confidentiality clauses in your employment contracts or separate confidentiality deeds are essential for protecting your business’s confidential information. If the ban on non-compete clauses becomes law, strengthening these remaining parts of your contracts will be paramount.

The takeaway

This reform has been years in the making, and the direction is now firmly set: broad restrictions on non-compete clauses for most employees, with narrower carve-outs still to be defined. The window to have a say closes on 2 October 2026.

Beyond that, the sensible move for now is awareness and preparation, not a rush to rewrite contracts based on a document that is still open for feedback.

We’ll continue tracking this as the draft legislation progresses and will share more specific guidance as details become clearer.

Want to learn more?

If you’re unsure what’s in your current employment contracts or how this reform could affect your business, Citation Legal can help you get across your existing restraint clauses and prepare for what’s coming.

Our author:

Zoe McQuillian – Special Counsel at Citation Legal

This article is general information only and is not legal advice. It reflects the position as at 7 September 2026, while the draft legislation remains open for consultation.