16/10/2026
The consultation draft of the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 has recently been published, providing insight into the government’s proposed bans on non-compete clauses.
Non-compete clauses are common place in many employment agreements, however, the proposed Bill would place significant limitations on the use of these terms for casual, full time and part time employees.
The proposed bans would prohibit use of the following types of terms in any employment arrangement (which includes a contract, a deed, a policy or other arrangement with employees):
- Non-compete terms
Non-compete terms are defined to be any term in an employment arrangement that restrict, prohibit or prevent an employee from seeking other employment or being involved in a business after ceasing employment. For example, prohibitions on employees working for competitors or starting a competing business.
However, the following terms are expressly excluded from this prohibition:
- non-compete terms for employees earning above the high-income threshold – provided the terms are reasonable and necessary to protect the legitimate business interests of the organisation (currently $190,100 annually);
- appropriately drafted clauses limited to the protection of confidential information;
- retention terms, such as retention bonuses or similar including those which accrue only after a minimum period of employment; and
- agreed notice periods for ceasing employment.
- Ban the use of cascading restraint clauses
Cascading clauses that provide for a range of geographical scope or restraint periods are expressly prohibited, with no exceptions and this prohibition applies equally to high-income employees.
- Ban co-worker non solicitation terms
These are terms that restrict former employees from recruiting a “co-worker”, being a person who currently or formerly does work for their former employer. This includes employees, contractors, subcontractors, labour hire staff, apprentices, and volunteers.
These are only permitted if expressly provided elsewhere in Commonwealth, State or Territory law.
What does this mean for employers?
Under the Bill, where a prohibited term is included in an employment arrangement it will not be enforceable. Corporations who breach these prohibitions may also face significant penalties for breach, of up to $1 million for serious offences and around $109,200 for non-serious offences.
The government has not yet confirmed when the Bill is expected to go through parliament, however, it could come into effect as early as January 2027. The prohibitions will apply to employment arrangements agreed to or varied after the Bill comes into force. If you would like to understand more about what this means for you, please reach out to your team of employment law experts.
