Albo axes non‑competes: What employers need to know

In March 2025, the Federal Labor Government announced a ban on non-compete clauses in Australia for workers earning under the high-income threshold. Legislation is yet to be passed to enact the ban. However, in July 2025 the Government released a Consultation Paper seeking feedback on the proposed non-compete ban (as well as other associated changes).

The non-compete ban (and potentially other associated changes) are intended to take effect by 2027, giving employers plenty of time to make any necessary changes.

Non-compete clauses – the current approach

Non-compete clauses are restrictions in employment (and other) contracts that attempt to prevent employees (and other workers) from working for a competitor after they leave their current employment (or engagement). Employers frequently use non-compete clauses as a means to protect their confidential information as well as other business interests such as maintaining client connections.

Non-compete clauses (and other restraints of trade) are only enforceable to the extent reasonably necessary to protect a legitimate business interest. This means when an employee with a non-compete clause leaves their employer to work for a competitor, there is a live legal issue regarding whether the non-compete clause is enforceable as a matter of law. The practical effect of this is that employees are often reluctant to engage in conduct that might breach a non-compete clause in their contract, even though a court may ultimately find the clause was unenforceable because it was not reasonably necessary to protect a legitimate business interest. Employees are also often reluctant to challenge the enforceability of non-compete clauses in court due to the significant legal costs involved. This so-called ‘chilling effect’ of non-compete clauses (i.e. the possibility and cost of legal action discouraging workers from moving jobs) is the stated reason why the government is proposing to ban them.

What we know about the proposed ban so far

At this stage, the Government has announced:

• it will amend the Fair Work Act 2009 (Cth) to ban the use of non-compete clauses for workers earning under the high-income threshold (currently $183,100) from 2027;
• such a ban will not extend to non-compete clauses associated with the sale of businesses;
• it will ban ‘no poach’ agreements between businesses that block workers from being hired by competitors; and
• it will also ban anti-competitive wage fixing arrangements between businesses, which cap the pay and conditions of workers at the businesses (without their knowledge).

The Consultation Paper issued by the Government in July 2025 also gives some insight into other changes the Government might implement. These include:

• whether the ban on non-compete clauses should be prospective only (i.e. for contracts entered into after the ban comes into effect sometime in 2027), or whether it should apply to existing contracts as well;
• whether there should be any exemptions to the ban of non-compete clauses for workers earning less than the high-income threshold which would need to be justified on strong public policy or national interest grounds;
• introducing civil penalties for employers who continue to include unlawful restraints in employment contracts after the ban comes into effect (similar to the current prohibitions on pay secrecy terms);
• empowering the Fair Work Commission to resolve disputes between parties in relation to non-compete clauses (such as whether a contractual clause constitutes a non-compete or whether an exemption applies)
• banning or placing limitations on non-compete clauses for workers earning above the high-income threshold (with options including introducing mandatory compensation requirements for the duration of the restraint, or introducing a statutory limitation on the duration of the non-compete clause);
• banning or limiting the use of non-solicitation clauses (including client non-solicitation clauses and co-worker non-solicitation clauses);
• prohibiting the use of ‘cascading’ restraints (i.e. the use of alternate, overlapping restraints of reducing duration or area, which allows a court to ‘sever’ part of the restraint if that part is unenforceable, leaving the rest of the restraint intact); and
• banning ‘exclusive service’ clauses in employment contracts, particularly those prohibiting part time or casual employees from having other employment.

What does this mean for employers?

Employers who currently rely on non-compete clauses to protect their business interests will need to revise their approach prior to the ban coming into effect in 2027. Given that consultation on proposed changes has already occurred and the intended effective date for the ban is 2027, we expect the Federal Government to try and legislate the changes sometime in 2026.

Employers should keep a close eye out for the exact scope of the changes when the Government passes the legislation, as given the matters consulted on by the Government, there are likely to be other associated changes (see above) not just a ban on non-compete clauses for workers under the high-income threshold.

In the meantime, employers should consider the following:

• reviewing and updating template contracts to remove non-compete clauses (for those earning less than the high-income threshold);
• updatingexisting clauses in template contracts protecting confidential information and intellectual property; and
• including longer notice periods and gardening leave clauses in employment contracts for key employees, as a means to protect business interests in circumstances where a non-compete clause cannot be used.