The federal government has released draft legislation banning non-compete clauses for Australian workers earning under $190,100 a year, in a move it says will free employees to take higher-paying jobs without needing a former employer’s consent.
But industry groups say it isn’t necessary and will create avoidable risks for many businesses.
A non-compete clause prevents an employee from working for a rival business or starting a competing company for a set period after they leave their job, and usually applies regardless of whether that occurred due to resignation, redundancy or firing.
The draft legislation will cover workers paid under $190,100 per year, which is the Fair Work Act high‑income threshold.
“Non-compete clauses drag down wages, handcuff workers, and put a handbrake on labour productivity,” Rishworth said.
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Leigh said the reform was about giving workers back control over their careers.
“Workers shouldn’t need their old boss’s permission to take a better job,” he said.
Employers Alarmed
However, some employers say the measure puts the viability of their business at risk.
Innes Willox, the group’s chief executive, said non-compete clauses are already unenforceable under common law “unless they are reasonable and protect an employer’s legitimate interests.”
“Just think about employees working in sales roles, preparing commercial tenders or privy to confidential production processes or business plans. This applies to a lot more employees than the hairdressers commonly referred to by the government’s spokespeople.”
The Australian Chamber of Commerce and Industry (ACCI) also opposes the new law, saying the courts are the appropriate place to test the validity of any non-compete clause.
The body said the greatest effect would be felt in industries which rely heavily on personal relationships between staff and clients, such as childcare, trades, hairdressing and beauty, retail, hospitality, healthcare support and administration.
Other Restrictions to be Examined
Alongside the ban, the government said it would consult on further changes to restraint practices, including prohibitions on co-worker non-solicitation clauses, no-poach arrangements between businesses, wage-fixing schemes and cascading restraint clauses, which extend obligations through chains of related entities.
The government’s case for the change draws on research commissioned as part of its long-running competition review, which began examining non-compete clauses and other worker restraints in 2023.
It concluded that use of the restriction had increased in recent years and would continue to do so without policy intervention by the government.
