Government’s proposed non-compete legislation drafted

The Albanese Government has taken a significant step towards restricting the use of non-compete (aka: restraint) clauses in employment contracts, releasing draft legislation designed to “spur new business entry and competition”.

The Government claims the proposed reforms, originally announced as part of the Federal Budget in May 2025, are intended to improve employee mobility, increase competition and remove contractual restrictions that may prevent employees from accepting alternative employment.

On 7 September 2026, the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 was released for public consultation. Under the proposed legislation, non-compete clauses would be prohibited for employees earning at or below the high-income threshold (currently $190,100 per annum). Non-compete clauses generally prevent former employees from working for competing businesses or establishing competing businesses for a specified period after their employment ends. The proposed legislation also prohibits the implementation of non-compete clauses for casual employees (regardless of earnings) and would restrict employers from preventing ex-employees from soliciting their former colleagues to leave employment. Agreements between businesses restricting employee recruitment or fixing employment remuneration would also be prohibited.

Non-compete clauses – which have always been difficult to enforce – would remain permissible in limited circumstances for employees earning above the high-income threshold, subject to stricter requirements concerning their reasonableness and necessity.

Importantly, appropriately drafted confidentiality provisions and certain other protections for legitimate business interests would remain available and employees will still have a duty to refrain from engaging in conduct that conflicts with the interests of their employer whilst employed.

The public consultation period for the draft legislation closed on 2 October 2026 with the Government having previously indicated that the reforms were intended to commence from February 2027 (pending passage through Parliament).

Under the current law, post-employment restraints are generally presumed unenforceable unless an employer can establish that the restriction is reasonable and necessary to protect a legitimate business interest, such as confidential information or customer relationships. Employer Services Legal can assist in the drafting of a suitable non-compete clause for professions where post-employment restraint is typically enforceable (e.g. doctors, dentists, orthodontists, etc).