Draft laws will bar non-compete clauses for those earning under $190,100, but employer groups warn the changes go too far
The Albanese Government has released draft legislation banning non-compete clauses for Australian workers earning less than $190,100 a year, the Fair Work Act high-income threshold, in a move it says will lift wages and improve job mobility, but which employer groups have labelled heavy-handed.
The reforms target clauses that prevent workers moving to a better-paying job. The government says more than three million Australian workers are currently constrained by a non-compete clause, including childcare workers, tradespeople and receptionists.
Non-compete clauses are contractual terms that stop an employee from joining a competitor or starting a rival business for a set period after leaving a job. According to research by the e61 Institute, one in five Australian workers is subject to a non-compete clause, and removing such restrictions could lift affected workers' wages by up to four per cent – roughly $2,500 a year for a typical worker.
"Non-compete clauses drag down wages, handcuff workers, and put a handbrake on labour productivity," Rishworth said. "Labor is determined to help boost job mobility for the more than three million Australian workers constrained by a non-compete clause, including childcare workers, construction workers, and hairdressers."
Leigh said the changes were about giving workers back control of their careers. "Workers shouldn't need their old boss's permission to take a better job," he said. "Non-compete clauses can act like a padlock on opportunity, holding down wages and keeping people from jobs where their skills are worth more. We're cutting that padlock."
Beyond the core ban, the government will also consult on prohibiting co-worker non-solicitation clauses, no-poach and wage-fixing arrangements between employers, and cascading restraint-of-trade clauses, alongside "appropriate exemptions and safeguards to protect legitimate business interests." Submissions can be made via the Treasury consultation hub until 2 October 2026.
Employer groups push back on the threshold
The Australian Industry Group has been among the most vocal critics of the proposal. Chief executive Innes Willox said the changes were unnecessary given existing common law protections. "The changes introduced banning non-compete clauses for many workers are unnecessary and will result in predictable problematic consequences for many in industry," Willox said.
He argued the $190,100 threshold would capture employees who handle sensitive commercial information despite earning below that figure. "There are many employees earning below $191,100 who are engaged in roles involving access to commercially sensitive or otherwise confidential information," he said, pointing to sales staff and those preparing commercial tenders as examples.
Willox also warned the changes could deter employers from investing in staff training. "This will undermine our competitive position internationally and will foreseeably hurt rather than help our already abysmal productivity levels," he said, adding that AIG would seek a "more nuanced approach" during consultation.
What it means for employers now
Gazelle Kalk, associate director – content and training at Peninsula Australia, said the proposed reforms could prompt a broad review of employment documentation across the market.
"The Federal Government's proposed ban on non-compete clauses for workers earning less than $190,100 per year could require thousands of Australian businesses to review their employment contracts," Kalk said.
Kalk noted that non-competes are not employers' only avenue for protecting commercial interests. "Well-drafted confidentiality provisions, intellectual property protections and other contractual safeguards can still play an important role in protecting commercially sensitive information," she said, while urging businesses to revisit workplace policies that "have not revisited their employment documentation for several years."
She added that the real question for employers is broader than the legislation itself: "how to attract, retain and protect talent in an increasingly competitive labour market."
With consultation open until October, HR and legal teams have several weeks to assess how the threshold, exemptions and safeguard provisions may reshape existing employment contracts before any bill is introduced to parliament.
