What is on the Horizon for Non-Compete Clauses?

In a week where pre-election commitments have peppered mainstream media, it may have come as a surprise to learn that the Federal Government is proposing to introduce legislation to restrict the use of non-compete clauses in employment contracts.

We understand that this proposal is premised on the Government’s desire to encourage labor market growth and job mobility, and empower workers to seek the best wages possible, without restriction.

A non-compete clause is a means by which employers seek to prohibit or limit a former employee’s ability to be employed by, or engaged with, a competitor. They are a legitimate way for employers to protect their business interests. Given the inherently restrictive nature of such terms, non-compete clauses need to be bespoke and well-drafted to be enforceable. Even in that scenario, non-compete clauses can be difficult and costly to enforce. For that reason, many employers include them in contracts as a deterrent but accepting the ultimate difficulty of enforcing them.

However, based on the information provided by the Federal Government, even including such terms as a deterrent will likely be prohibited.

Framed as a cost-of-living measure to assist employees in the low to middle income bracket, it is the intention of the Federal Government to prohibit the inclusion of non-compete clauses in employment contracts for individuals earning below $175,000 per year. This amount aligns with the current High Income Threshold (HIT), so we would anticipate that the proposed threshold would be indexed each year along with the HIT.

However, whilst announced as part of the 2025/2026 budget, the proposed change would not take effect from 2027.

As we are now approaching a Federal election, this thought bubble may not be realised. However, if the Labor party is returned to government, non-compete clauses will likely be on the chopping block for the new Parliament. Watch this space.

Cecilia White( Director, HR Consulting )

With a background in legal practice, Cecilia has developed strong technical expertise in all matters relating to workplace law, including awards, contracts, disciplinary matters, investigations, equal opportunity and HR policy development. Her legal background is combined with her expertise across all areas of HR management and strategy, as well as significant experience in delivering workplace training.

Cecilia is also an experienced and nationally accredited mediator, specialising in workplace mediation.

With a proven ability to provide advice that is both technically sound and commercially pragmatic, Cecilia’s focus is to develop strong partnerships with clients and work with them to manage risk and liability, ensure compliance, optimise performance and achieve positive outcomes for their organisation, however large or small. She strongly believes that prevention is better than the cure and that strong policies and contracts, early intervention and excellent communication are critical to ensuring effective people management.