For decades, many Australian employers have put a non-compete clause in employment contracts: a promise that the employee will not work for a competitor, or start a competing business, for months or years after leaving. The Federal Government now plans to ban most of them.
Important: at the time of writing this is a proposal. The Government has released an exposure draft of the legislation and consultation closed in early October 2026. It is not law until Parliament passes it, so check its current status before acting.
What is proposed
- A ban on non-compete clauses for most employees: those earning below the Fair Work "high income threshold", which is indexed each 1 July.
- Prospective only: the ban would apply to clauses in contracts made or varied after it commences. Existing clauses are not automatically wiped out.
- Start date: the draft provides for commencement on the first 1 January, 1 April, 1 July or 1 October after the Bill receives Royal Assent, so 1 January 2027 is possible but not certain.
- Wider competition measures: the package also targets arrangements between businesses not to poach each other's staff or to fix wages.
- Sale-of-business non-competes are excluded. A seller can still agree not to compete with the buyer for a reasonable period.
- Contractors are outside the draft, although the Government has been consulting on whether to cover employee-like contractors later.
The law today
Until a ban takes effect, the existing common-law rules apply. A restraint of trade is void unless it goes no further than is reasonably necessary to protect a legitimate interest of the employer, such as confidential information, trade secrets or customer connections. Courts look at how long the restraint lasts, how wide an area it covers and how narrowly the activity is defined. A bare wish to keep a good employee away from competitors is not enough.
That is why many employers' restraints are hard to enforce even now, and why a poorly drafted clause can be worse than none.
If you are an employer
- List every contract and template that contains a restraint, including staggered or "cascading" clauses.
- Protect the real interest by other means: confidentiality obligations, IP assignment, non-solicitation of clients and staff, notice periods and paid garden leave.
- Plan for new hires. Contracts signed after the ban starts should not rely on a non-compete for covered employees.
- Keep sale-of-business restraints carefully drafted: they remain lawful and valuable.
- Do not rewrite everything in a rush. Existing restraints still follow today's rules, and the final law may differ from the draft.
If you are an employee
Do not assume a clause you signed is invalid, or that you can ignore it. Whether it is enforceable depends on its wording and the employer's real interests. Get the clause reviewed before you resign or accept a competing job, because an injunction application can come quickly.
Western Australia
Many WA employers are in the federal system, but sole traders, partnerships of individuals and some trusts are in the WA state system, where different rules can apply. Which system you are in is the first thing to confirm.
Our employment lawyers draft and review employment contracts, restraints and confidentiality terms, and our business sale team can advise on restraints for sellers and buyers.
General information only, current at November 2026. It is not legal advice.
