In brief
The Federal Government’s proposed ban on non-compete clauses looks set to come to fruition, with the release of the Competition and Fair Work Legislation Amendment (Banning Unfair Non-Competes) Bill 2026 ("Bill") earlier this week. The Bill follows the Government’s March 2025 Budget1 commitment to prohibit non-compete clauses for low and middle-income workers and its subsequent consultation2 on non-competes and other restraints affecting worker mobility.
The Bill goes further than anticipated, including by banning co-worker solicitation clauses, prohibiting “cascading” drafting, and imposing significant penalties.
Key takeaways for employers
- The Bill bans non-competes for employees, unless their annualised full-time equivalent earnings exceed the high income threshold. The amount of payments which cannot be determined in advance (e.g., most incentives or commissions) will not be included in this calculation.
- The Bill also bans terms that prevent employees from soliciting co-workers. There is no carve out for high income employees.
- Post-employment restrictions will be governed solely by the Fair Work Act 2009 (Cth) and may only be permitted to protect confidential information or the misuse of client connections gained as a result of particular employment. The Restraints of Trade Act 1976 (NSW) will no longer apply to employment restraints in New South Wales.
- The use of “cascading provisions” that contain alternative restrictions aimed at ensuring the validity of a post-employment restrictions will be prohibited.
- Serious penalties will apply for breach – up to AUD 109,200 for a company or AUD 21,840 for an individual; or up to ten times those amounts for breaches committed intentionally or recklessly. There will be a six-month grace period before penalties apply.
- The provisions will apply to new arrangements and any employment arrangements that are amended after commencement of the provisions.
- The Government is seeking feedback on the draft legislation by 2 October.
In more detail
While much of the Bill is expected, we are surprised by a number of aspects.
Prohibition on co-worker solicitation terms
Terms prohibiting the solicitation of co-workers will be banned in addition to non-competes. This means that the only restraints that will be enforceable will be restraints on the solicitation of clients or aimed at protecting confidential information, provided they go no further than is reasonable and necessary.
Ban on “cascading” provisions
Employers will be used to seeing restraints drafted so that they apply for a range of periods and over a range of areas (e.g., 12 months; nine months; six months. New South Wales; Victoria; Queensland). Drafting in this manner has allowed Courts to enforce restraints for particular durations across particular areas, even if the Court considered that enforcing the restraint to its maximum extent would be unreasonable.
The prohibition on this kind of drafting is significant. It means that post-employment restrictions must be well thought out and tailored to the particular employee. Cascading arrangements will no longer work as a catch all.
Only base earnings will be taken into account in determining which employees are captured
While this is less of a surprise, the ban will apply to employees whose base earnings is less than the high income threshold. This creates a real area of risk when it comes to sales employees who earn a comparatively low base salary and high rates of commission. Commission will not be taken into account in determining whether the ban applies to a particular employee.
The proposed penalties
The proposed penalties are significant. Non-compliance will come at a high cost.
Application to varied arrangements
The Bill applies to new arrangements, but also employment arrangements that are “amended” after the commencement of the provisions. This may include circumstances where a contract is amended (e.g., to increase salary or change an employee’s position) without any intent to amend its post-employment restrictions.
So, what now?
Consultation is open until 2 October. Employers may wish to consider making submissions on the draft legislation.
Otherwise, for organisations that have traditionally relied on non-compete clauses beyond senior executive roles, early consideration of alternative protections will be critical to ensuring business continuity and reducing legal and operational exposure under the new regime.
Alternative protections may include:
- Longer notice periods. Notice periods are not captured by the legislation. Longer notice periods can provide employers with valuable time to manage the transition of key employees and protect business interests before their departure.
- Well-drafted gardening leave provisions.
- Robust confidentiality and intellectual property provisions can provide important protection where post-employment restraints are unavailable or limited.
- Retention – it’s cheeky of us, but we couldn’t sign off without giving it a mention!
Sophie Herd, Senior Associate, and Renata Beris, Associate, have contributed to this article.
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