18 May Non-Compete Clauses: What is Changing?
The Albanese Labor Government has proposed a ban on non-compete clauses on a number of occasions. Most recently, a ban on non-compete clauses was announced as part of the 2025 budget and as a measure that would be enacted if Labor was to win the 2025 Federal election. See a link to the media announcement by Jim Chalmers, Murray Watt and Andrew Leigh here.
What are Non-Compete Clauses?
Non-compete clauses come in many forms. They are broadly a term in an employment contract that restricts an employee from working for a competing business for a specific duration after their employment ends and within a specific area .
Not all post employment restraints are enforceable by an employer, but that does not mean an employer will not seek to include it in an employment contract and try and enforce the restraint. See our article here on enforceability of restraints of trade.
What is Changing to Non-Compete Clauses?
The change Labor is proposing is not a complete change to non-compete restraints. It is a ban to including non-compete restraints in employment contracts for employees who earn less than the high-income threshold, which is currently $175,000, with penalties for employers who include these types of clauses. The reform will be an amendment to the Fair Work Act 2009 (Cth) and, if passed, is expected to take effect from 2027.
Conclusion
It is difficult to tell what the long-term impact of a ban on non-compete restraints will be for employers and employees.
Dr Chalmers mentions research that suggests the change could lift the wages of affected workers by up to four per cent and refers to Productivity Commission modelling suggesting the changes could improve productivity and add to GDP annually. However, it is difficult to tell if this will actually be the result.
Please see more articles on Restraints of Trade here.
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