With significant public sentiment in support of regulation and the roll out of partial bans on non-compete restraints in Luxembourg and Austria (as well as a proposed 3 month non-compete time limit in the UK), it is hardly surprising that the Albanese Government has announced a proposed ban on non-competes.

In Australia, it is well established that a restraint of trade is considered, on the face of it, to be void at common law for being contrary to public interest, unless it goes no further than is necessary to protect the parties and the interest of the public. In the context of employment, the restraint should go no further than is reasonably necessary to protect the legitimate interests of the employer in respect of, for example, its commercial interests and assets such as trade secrets, confidential information and goodwill (including customer connections). 

Reasonableness is assessed at the time of entry into the restraint and is determined by reference to the scope of the activities it purports to restrain, duration of the restraint, and geographical area covered by the restraint. Factors such as the degree to which the employer’s business is dependent on long-term patronage by customers, the nature of the industry, the skill, experience and seniority of the restrained employee, and the closeness and regularity of the relationship between the restrained employee and the employer’s clients/customers are all relevant, under current law, to the question of reasonableness. In simple terms, having regard to all relevant factors, the Court will then weigh up the detriment to the business of the employee starting work for the new employer against the detriment to the employee of not being able to work and determine where the balance of convenience lies.

However, under the proposed reforms, the income of an employee will be determinative, at a threshold level, of whether a non-compete is lawful, with consideration of the reasonableness of the restraint only coming into play for those who meet or exceed the income threshold and can, therefore, be lawfully restrained.

Proposed reforms 

The impacts of restraint clauses on job mobility, businesses and the wider economy was considered by the Australian Treasury as part of its 2023 Competition Review. In its April 2024 Issues Paper, the Treasury noted:

• an increasing prevalence of restraints across all industries, with 46.9% of Australian businesses using some type of restraint clause^[1];
   
• that while useful for protecting a business’s confidential information, intellectual property and goodwill, studies have demonstrated that non-competes can also have negative impacts on junior/ lower remunerated employees who may not have the bargaining power or resources to challenge the restraint. In turn, this can have broader implications on economic growth, job mobility, wages and innovation; and
   
• while non-solicitation clauses may appear less restrictive than non-compete clauses, they can still have considerable impacts on the job mobility of employees who work within client-centric industries or for employees based in regional or remote areas. 

The response from the Government is a proposed prohibition on non-compete restraints for employees earning below the high-income threshold set by the Fair Work Act 2009 (Cth) (currently $183,100 as at 1 July 2025) plus the stated intention to address current ‘loopholes’ in competition legislation that allow businesses to make non-poach and wage-fixing agreements without the knowledge and consent of the impacted employees.

Consultation 

It is early days and the Government has announced that further consultation is required before any legislation can be introduced to Parliament. As such, the ‘Reform to non-compete clauses and other restraints on workers – Consultation paper’ was published on 25 July 2025. 

The Consultation Paper seeks further stakeholder views on the proposed reforms, as well as feedback on 31 consultation questions, a number of which highlight the complexity of competing considerations and the importance of getting the reforms right.  Relevant considerations include:

• What is the appropriate penalty for a breach of the non-compete ban?
• Should there be any exemptions to the non-compete restraints prohibition?
• Should there be any defences available if a business contravenes the ban?
• Should the ban apply to non-employees, including independent contractors?
• Should restraints with cascading duration periods and geographic areas be permitted?
• Should the use of non-solicitation restraints be restricted, and if so, what types of restrictions are appropriate?

As there will be many employers with banned clauses in their existing employee contracts when the reforms take effect, there is also the question of what transitional arrangements should be implemented. 

In this regard the Consultation Paper refers to the possibility of including provisions in the legislation that clarify how existing restraints will be impacted and that institute a ‘grace period’ in which penalties for non-compliance would not be enforced. Reference is also made to the option of rolling out educational programs that allow businesses to adjust to the reforms and to ensure that workers understand their rights. 

Of importance, the Consultation Paper clarifies that the proposed reforms do not apply to restraints used beyond the employment context (for example, in a sale of business arrangement) or to confidentiality clauses used within employment contracts. 

The opportunity to make submissions closes soon (5 September 2025). 

Once consultation closes, all information will be collated and published on the Treasury website and, even if your organisation is not inclined to make submissions, the views published should make for interesting reading, providing useful insight into the relevant considerations from a range of perspectives across various industries.

Stay tuned for our update once a draft bill is introduced to Parliament.

Key takeaways 

In anticipation of the reforms, businesses should:

• Identify those employees who earn below the high-income threshold that are subject to non-competes (if any) and that may fall within the scope of the ban.
• Consider whether the ban will give rise to any material risks to your business with respect to those categories of employees you identify.
• Consider alternative ways to protect your business from post-termination competition and solicitation, including bolstering intellectual property or confidentiality obligations, and, where appropriate, requiring longer notice periods or placing employees on gardening leave.